We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byNora Rich
Modified over 4 years ago
©CourseCollege.com 1 6 Merchandising Learning Objectives 1.Describe selected merchandising activities 2.Account for the purchase and sale of merchandise inventory 3.Account for purchase and sales returns and allowances Merchandisers need additional accounts
©CourseCollege.com 2 Service Firm Sales (Expenses) Net Income Service Firm Sales (Expenses) Net Income Income Statement Service vs Merchandising No COGS Merchandising Firm Sales (Cost of Goods Sold) Gross Profit (Expenses) Net Income Merchandising Firm Sales (Cost of Goods Sold) Gross Profit (Expenses) Net Income
©CourseCollege.com 3 Merchandising accounts Merchandising firms need: Inventory Cost of Goods Sold* accounts. *perpetual inventory method
©CourseCollege.com 4 Merchandising firms sell physical inventory Merchandising Firms Manufacturer Wholesaler RetailerCustomer
©CourseCollege.com 5 Objective 6.1: Describe selected merchandising activities O6.1 Santana Sailboards FOB SHIPPING POINT Buyer pays freight-in Buyer owns merchandise on carrier at this point FOB DESTINATION Seller pays freight-in Buyer owns merchandise when unloaded at this point Wind Supply Overland Trucking Freight In Terms
©CourseCollege.com 6 Describe selected merchandising activities – trade discounts O6.1 Trade discounts are used by merchandisers to simplified their publications of prices. Rather than producing many different price lists, a list price publication is prepared. From the list price, various trade discounts are then negotiated with customers. Wind Supply List Prices __________ ______ __________ _______________ ______ __________ ______ Trade Discount 25% For example Santana Sailboard gets a 25% trade discount off of Wind Supply’s list prices. $500 list price – (.25 *$500) = $375 purchase price
©CourseCollege.com 7 Describe selected merchandising activities O6.1 The periodic method keeps track of purchases using a temporary purchases account. Adding net purchases to beginning inventory provides the total available that could have been sold. Subtracting the physical count of inventory reveals the Cost of Goods Sold only after the ending inventory has been tallied. Periodic Formula
©CourseCollege.com 8 Describe selected merchandising activities – periodic formula O6.1 Determined with a physical count. + Beginning Inventory Beginning Inventory Net Purchases Net Purchases Ending Inventory Ending Inventory Cost of Goods Sold Cost of Goods Sold Goods Available For sale Goods Available For sale + Periodic Formula
©CourseCollege.com 9 Describe selected merchandising activities – operating cycle Credit Sale Accounts Receivable Inventory Cash Sale Inventory O6.1 If credit terms are offered to customers, an increased operating cycle results. The merchandiser is obliged to wait longer before cash is received from each credit sale.
©CourseCollege.com 10 Describe selected merchandising activities – sales invoice O6.1 Shipping terms FOB shipping point
©CourseCollege.com 11 Describe selected merchandising activities- sales invoice O6.1 Credit terms are described here
©CourseCollege.com 12 Describe selected merchandising activities credit terms O6.1 Credit period 2/10/n30 Discount period Discount percentage
©CourseCollege.com 13 Objective 6.2: Account for the purchase and sale of merchandise inventory O6.2 Reminder We will use the perpetual inventory method and record purchases at gross amounts Accounting rules direct the cost of inventory to include all the costs of purchasing inventory, transporting it to the buyer’s place of business and bringing it to a saleable condition
©CourseCollege.com 14 March 14, 2010, Santana Sailboards completed the purchase on account (per previous invoice shown) of inventory costing$19,632 plus $325 for freight in charges. Credit terms are 2/10/n30. The journal entry to record the purchase is shown below. The asset account Inventory is increased. BUYER Example –purchase of merchandise O6.2
©CourseCollege.com 15 Santana pays the Wind Supply invoice within the discount period. Following the Cost Concept, the totals in the Inventory account must be reduced by the amount of the discount. Cost Concept BUYER O6.2 Cost of merchandise inventory $19,632 *.02 = $392.64 Per the invoice terms, the purchase discount of 2% is not applied to the shipping charges. Buyer pays invoice
©CourseCollege.com 16 Seller –needs contra revenue accounts Sales Discounts (4) Net Sales 94 Sales Returns & Allowances (2) Sales 100
©CourseCollege.com 17 Wind Supply records the payment on account received from Santana Sailboards. O6.2 Remember that the entire receivable is satisfied (paid) with the payment made within the discount period. SELLER Sales price of merchandise inventory, $19,632 *.02 = $392.64 Seller records payment from buyer
©CourseCollege.com 18 A buyer could choose to record the initial purchase on account at the net amount due within the discount period. Consider a $10,000 purchase of merchandise on account with 2/10/n30 credit terms. O6.2 Gross vs net method of recording purchase BUYER records GROSS amount due BUYER records NET amount due Purchase price of merchandise inventory, $10,000 *.98 = $9,800
©CourseCollege.com 19 Payments using net method of recording purchases O6.2 BUYER pays NET amount due within discount period The Discounts Lost must be reported as an expense, immediately bringing attention to the failure to achieve the discount. BUYER pays NET amount due after discount period
©CourseCollege.com 20 Recording sales using the perpetual method O6.2 PERPETUAL INVENTORY SYSTEM 1.Record the sale itself 2.Record the affect on inventory The sale on account below requires a two step journal entry... 1 2 SELLER
©CourseCollege.com 21 Objective 6.3: Account for purchase and sales returns and allowances O6.3 A return occurs when the buyer gives purchased merchandise back to the seller. An allowance occurs when the seller agrees to reduce the amount the buyer owes the seller for a variety of reasons including damage, late delivery, incorrect merchandise etc
©CourseCollege.com 22 Account for purchase and sales returns and allowances O6.3 In a return, the inventory is given back to the seller In an allowance, the buyer does not return the inventory to the seller. To document a return or allowance the seller often issues a credit memo to the buyer
©CourseCollege.com 23 Account for purchase and sales returns and allowances O6.3 Below is the buyer’s recording of a return of $1,585 of merchandise to the seller. The buyer receives and records a $1,585 credit memo from the seller for merchandise returned BUYER
©CourseCollege.com 24 The same return from the seller’s perspective O6.3 Seller’s two step process 1.Undo the sale using a contra revenue account 2.Update the inventory if the merchandise is saleable The seller uses a contra revenue account to eliminate the effect of the sale 1 2 SELLER
©CourseCollege.com 25 Recording an allowance in a merchandise transaction O6.3 Assume that buyer and seller agree to a $350 allowance involving a previous inventory purchase. The journal entries to record the allowance by the buyer and seller are shown... BUYER SELLER
©CourseCollege.com 26 End Unit 6
Accounting for Merchandising Operations
Accounting for Merchandise Operations Chapter 4. Income Statement Accounts Sales Revenue account Sales discounts Amounts deducted from sales price.
Reporting and Analyzing Merchandising Activities
Accounting for Merchandising Businesses
© The McGraw-Hill Companies, Inc., 2008 McGraw-Hill/Irwin 6-1 Merchandising Activities Chapter 6.
ACCOUNTING FOR MERCHANDISING OPERATIONS
The Operating Cycle and Merchandising Operations 6.
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fourth Edition Wild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011.
5 Accounting for Merchandising Activities CHAPTER
Principles of Financial Accounting, 11e
Copyright © 2007 Prentice-Hall. All rights reserved 1 Merchandising Operations Chapter 5.
©The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin Chapter Five Accounting for Merchandising Businesses.
Chapter 4 Accounting for Merchandising Operations.
After studying this chapter, you should be able to: 1 identify the differences between a service enterprise and a merchandising company 2 explain the.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., Chapter 4 Reporting and Analyzing Merchandising Operations.
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fifth Edition Wild, Shaw, and Chiappetta Fifth Edition McGraw-Hill/Irwin Copyright © 2013.
© The McGraw-Hill Companies, Inc., 2006 McGraw-Hill/Irwin Accounting for Merchandising Operations Chapter 5 5.
© 2019 SlidePlayer.com Inc. All rights reserved.