Chapter 14, Section 1 Accounting for a Merchandising Business

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Presentation transcript:

Chapter 14 Accounting for Sales and Cash Receipts What You’ll Learn Explain the difference between a service business and a merchandising business. Analyze transactions relating to the sale of merchandise. Explain the difference between a retailer and a wholesaler. Record a variety of sales and cash receipt transactions in a general journal. Define the accounting terms introduced in this chapter. Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 14, Section 1 Accounting for a Merchandising Business What Do You Think? Why do consumers buy from retailers rather than wholesalers? Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting for a Merchandising Business SECTION 14.1 Main Idea A wholesaler sells to retailers, and a retailer sells to the final users. You Will Learn the operating cycle for a merchandising business. the accounts used in a merchandising business. issues relating to international sales. Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting for a Merchandising Business SECTION 14.1 Key Terms retailer wholesaler merchandise inventory Sales Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting for a Merchandising Business SECTION 14.1 The Operating Cycle of a Merchandising Business The merchandising business operating cycle is a series of transactions. Merchandisers buy goods and sell them to customers for a profit. Most merchandising businesses are both retailers and wholesalers. Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting for a Merchandising Business SECTION 14.1 The Operating Cycle of a Merchandising Business Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting for a Merchandising Business SECTION 14.1 Accounts Used by a Merchandising Business A merchandising business buys merchandise from a wholesaler or manufacturer and sells the goods to its customers. Merchandise in stock is called inventory. Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting for a Merchandising Business SECTION 14.1 Merchandise Inventory Account Inventory is represented in the general ledger by the asset account Merchandise Inventory. The normal balance of this account is a debit. Merchandise is bought and sold during the operating cycle; the purchase and sale of merchandise is recorded in separate accounts. Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting for a Merchandising Business SECTION 14.1 Sales Account The amount of merchandise sold is recorded in the Sales account, a revenue account. The normal balance of the Sales account is a credit. Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting for a Merchandising Business SECTION 14.1 International Sales The United Nations Convention on Contracts for the International Sales of Goods (CISG) provides guidelines governing the international sale of goods. Businesses involved in international sales must consider the challenge of multiple currencies. Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting for a Merchandising Business SECTION 14.1 Key Terms Review retailer A business that sells to the final user, the consumer. wholesaler A business that sells to the retailers. merchandise Goods bought to resell to customers. inventory The items of merchandise a business has in stock. Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting for a Merchandising Business SECTION 14.1 Key Terms Review Sales A revenue account to record the amount of the merchandise sold. Glencoe Accounting Unit 4 Chapter 14 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.