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Module 3 Notes

by: Julianna Smith

Module 3 Notes ACG 3074

Julianna Smith

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About this Document

This set of notes covers Module 3 (Chapter 5) and the video lecture for this module.
Managerial Accounting for Non-majors
Christine Andrews
Class Notes
managerial accounting
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This 3 page Class Notes was uploaded by Julianna Smith on Saturday February 6, 2016. The Class Notes belongs to ACG 3074 at University of South Florida taught by Christine Andrews in Spring 2016. Since its upload, it has received 12 views. For similar materials see Managerial Accounting for Non-majors in Accounting at University of South Florida.


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Date Created: 02/06/16
Managerial Accounting for Non-Majors Chapter 5 – Merchandising Operations >M3.1 – Merchandising Operations (Video Lecture) -Operating Cycle: 1. Company purchases inventory from an individual or business, called a vendor 2. The company then sells the inventory to a customer 3. The company collects cash from customers Journal Entries for Operating Cycle Inventory Cash To record the purchase of inventory Accounts Reveivable Sales Cost of Goods Sold Inventory To record the sale of inventory on account and cost of goods sold Cash Accounts Receivable To record cash collection -New accounts Cost of Goods Sold (Cost of Sales) – cost of merchandise inventory that business has sold to customers Gross Profit – excess of net Sales Revenue over Cost of Goods Sold Operating Expenses – expenses, other than Cost of Goods Sold, incurred in entity’s major ongoing operations -Financial Statements for Service Company Income Statement: Service Revenue – Operating Expenses = Net Income Balance Sheet: no Merchandise Inventory listed under Assets -Financial Statements for Merchandising Company Income Statement: Sales Revenue rather than Service Revenue -Sales Revenue – Cost of Goods Sold = Gross Profit -Gross Profit – Operating Expenses = Net Income Balance Sheet: Merchandise Inventory included in current assets >M3.2 – Recording Purchases and Sales -Perpetual Inventory System – adjust inventory account with every sale -invoice – seller’s request for payment from purchaser -The Merchandise Inventory account (Asset) is used only for goods purchased that the business owns and intend to resell to customers -Purchase Discount – discount that businesses offer to purchasers as incentive for early payment -Credit Terms – payment terms of purchase or sale as stated on invoice Example: “3/15, n/30” 3% from total bill can be deducted if company pays within 15 days of invoice date, otherwise the full amount (net) is due in 30 days Example Journal Entry: Accounts Payable 35,000 Cash ($35,000 - $1,050) 33,950 Merchandise Inventory ($35,000 X 0.3) 1,050 ASSETS↓ LIABILITIES↓ EQUITY Cash↓ Accounts Payable↓ Merchandise Inventory↓ >M3.3 – Preparing Merchandise Financial Statements -Multistep Income Statement Net Sales COGS Gross Profit Operating Expenses Operating Income Other Rev/Exp Income before Tax Tax Expense Net Income >Extra Notes -Gross Profit Percentage = Gross Profit / Net Sales Revenue (measures profitability of each sales dollar about the cost of goods sold) -Transportation Costs: FOB shipping point – buyer takes ownership of goods after goods leave seller’s place of business (mot cases, buyer pays freight) FOB destination – buyer takes ownership of goods at delivery (most cases, seller pays freight) Freight in – transportation cost to ship goods into purchaser’s warehouse (freight on purchased goods) Freight out – transportation cost to ship goods out of seller’s warehouse and to customer (freight on goods sold) Equations: Accounting Equation Assets = Liabilities + Equity Expanded Accounting Equation Assets = Liabilities + Common Stock – Dividends + Revenues - Expenses Stockholders’ Equity Equation Beginning Equity + Common Stock + Net Income (or – Net Loss) – Dividends = Ending Equity Ending Equity – Beginning Equity - Common Stock + Dividends = Net Income (Loss) Net Income Formula Revenues – Expenses = Net Income (Loss) Merchandise Inventory Sales Revenue – Cost of Goods Sold = Gross Profit Gross Profit – Operating Expenses = Net Income Gross Profit Percentage Gross Profit Percentage = Gross Profit / Net Sales Revenue


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