1. Financial Reporting for a Departmentalized Business
Chapter 4
Financial Reporting for a Departmentalized Business

2. Terms that you need to know
Fiscal Period
The length of time which a business summarizes and reports financial information.
Departmental Statement of gross profit
Provides a statement of revenue an cost information for each department.
Interim departmental statement of gross profit.
A statement that show revenue and cost information for a shorter term than a fiscal period.

3. Why do we use Departmental statements of gross profit
We use it to determine ending merchandise inventory.
Two types of computing inventory
Periodic
Physical inventory
Perpetual
Book inventory
We use the gross profit method of estimating an inventory with this type of

4. Estimating Ending Merchandise inventory
Calculating Net Purchases and Net Sales
Purchases – Purchase Return and Allowances – Purchases Discount = Net Purch.
Sales – Sales Return and Allowance – Sales Discount = Net Sales

5. Interim Departmental Statement of Gross Profit
Mastersport
Interim Departmental Statement of Gross Profit
For Month Ended June 30, XXXX
Golf
% of Net Sales
Tennis
Total
Operating Revenue
Net Sales
100%
Cost of Merchandise Sold:
Est. Mdse. Inv., June 1
Net Purchases
8916.4
Mdse Available for Sale
317177
Less Est. End. Inv. June 30
55%
Gross Profit on Operations
44%

6. 4-2 Preparing a Worksheet for a Departmentalized Business
Proving Accuracy between what our Accounts Payable/Receivable accounts in our general ledger say versus what our schedule of accounts payable/receivable say.
Remember that it is a check to make sure that there is balance between these accounts and the records we keep.

7. Schedule of Accounts Receivable
MasterSport
Schedule of Accounts Receivable
June 30, 200x
Lawrence Bissell
950.6
Eastside Sports Center
644.7
Galaxy Tennis club
1785
Golden golf League
1592.5
Mary Lynch
245.7
Par Golf Club
Total Accounts Receivable
Accounts Receivable
Account No. 140
Date
Item
Post Ref
Debit
Credit
Debit Balance
30-Jun S6

8. For Year Ended December 31, 200x
MasterSport
Work Sheet
For Year Ended December 31, 200x
Account Title
Trial Balance
Adjustments
Income Statement
Balance Sheet
Debit
Credit
The worksheet has many functions first and foremost it is used to make sure that the general ledger is balanced from the trial balance columns on the worksheet
Then we do our wonderful adjustments – remember that we do this to bring accounts up to date that may have changed throughout the year or month.

9. Just what you wanted some more adjustments
Uncollectible Accounts expense Adjustment- sometimes items are sold on account to customers who later cannot be collected from customers are business expenses.
From past experience that approximately 1% of the total sales on account will be uncollectible

10. Because people have not paid us it becomes an expense to us at the end of the year.
We also have to add it to the amount in which we allow not to be collected for the year.

11. Review of adjustments and there corresponding accounts
Allowance for uncollectible accounts
Merchandise Inventory – golf, tennis
Supplies – office, store
Accumulated Depreciation – store, office equipment
Uncollectible accounts expense
Income summary –golf, tennis
Supplies expense – office, store
Depreciation expense – store, office equipment

12. The only adjustment that is a little different is Federal income tax expense
We usually work from the top to the bottom of the worksheet, but this time we work from the bottom to the bottom.
Federal Income Tax Expense
Federal income tax payable
Please look with me on page

13. Why the worksheet Check the balance of the general ledger
Bring up to date accounts- using adjustments
Determine what goes on what sheet- Income statement, balance sheet (does the income summary account remind you of anything?
Determine net income.

14. For Year Ended December 31, 200x
MasterSport
Work Sheet
For Year Ended December 31, 200x
Account Title
Trial Balance
Adjustments
Income Statement
Balance Sheet
Debit
Credit
 Totals      
Net Income after Fed. Inc. Tax     
Net Income and making sure that both the debit and the credit are in balance from both columns

15. 4-3 Financial Statements for a Departmentalized Business
The 4 financial statements that you will prepare
Departmental Statement of Gross Profit
Income Statement
Statement of Stockholders’ Equity
Balance sheet

16. Departmental Statement of Gross Profit
Used to help us determine the actual ending periodic inventories for each department

17. Departmental Statement of Gross Profit
MasterSport
Departmental Statement of Gross Profit
For Year Ended December 31, 200x
Golf
%of Net Sales
Tennis
Total
Operating Revenue
Net Sales
$ 344,476.46
100%
$430,154.70
$ 774,631.16
Cost of Merchandise Sold:
Mdse. Inventory Jan 1
$ 18,434.61
$199,844.60
$ 218,279.21
Net Pruchases
$203,404.25
$218,534.55
$ 421,938.80
Mdse Available for Sale
$389,838.86
$418,379.15
$ 808,218.01
Less Ending Inv. Dec. 31
$204,855.00
$190,484.60
$ 395,339.60
Cost of Merchandise Sold
$ 184,983.86
53.7%
$227,894.55
53.0%
$ 412,878.41
53.3%
Gross Profit on Operations
$ 159,492.60
46.3%
$202,260.15
47.0%
$ 361,752.75
46.7%

18. Income statement Please look on page 114
Remember that the bottom line needs to match the bottom line on the worksheet.
You are also using the Statement of gross profit to fill in some of the blanks but also to help check your numbers.
For example: net sales should equal what you have on your statement of gross profit.

19. Statement of Stockholders Equity
2 major sections
Capital Stock
Total shares of ownership in a corporations.
Retained Earnings
An amount earned by a corporation and not yet distributed to stockholders

20. This is the number that we use to carry over to the Balance Sheet
MasterSport
Statement of Stockholders Equity
For Year Ended December 31, 200x
Capital Stock:
$ Per Share
January 1, ,000 shares Issued
$340,000.00
Issued during Current Year, None $
Balance December 31, 200x, 200 shares Issued
Retained Earnings:
Balance January 1, 200x
$ 42,210.50
Net Income after Federal income tax for 200x
$55,970.20
Less Dividends Declared during 200x
$30,000.00
Net Increase during 200x
$ 25,970.20
Balance, December 31, 200x
$ 68,480.70
Total Stockholders Equity December 31, 200x
$408,180.70
This is the number that we use to carry over to the Balance Sheet

21. 3 more things to do to end out the fiscal period.
Adjusting entries
Remember those entries are exactly like what we do on the worksheet.
Closing Entries
This is new for us.
Let look at what we need to do with this.

22. Closing Entries from accounting I
Accounting II
Close all of the Credit Side accounts in the Income Statement column to Income Summary account
Close all of the Debit Side accounts in the Income Statement column to the Income Summary account
Close the Income Summary Account to the Capital Account
Close Drawing Account to the Capital Account
Close all of the Credit Side accounts in the Income Statement column to Income Summary-General account
Close all of the Debit Side accounts in the Income Statement column to Income Summary-General account
Close the Income Summary Account to the Retained Earnings
Close Dividend Account to the Retained Earnings Account

23. Post-Closing Trial Balance
This is to make sure that all of the accounts that we have open are in balance and ready for the next fiscal period.
Please look on page 122

24. Here it is……
Problems 4-1,2,3,4,5,6,8
Computer Problem 4-7 (you must have 4-5 done before you can do( 4-7)