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by: Tyrell Halvorson

FinancialAccountingFoundations ACCT115

Marketplace > Drexel University > Accounting > ACCT115 > FinancialAccountingFoundations
Tyrell Halvorson
GPA 3.85


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Class Notes
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This 4 page Class Notes was uploaded by Tyrell Halvorson on Wednesday September 23, 2015. The Class Notes belongs to ACCT115 at Drexel University taught by StacyKline in Fall. Since its upload, it has received 13 views. For similar materials see /class/212547/acct115-drexel-university in Accounting at Drexel University.

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Date Created: 09/23/15
Chapter 5 Accounting for Merchandising Activities Inventing 9 goods thatt merchandising company sells to its customers gt relatively liquid asset Operating Cycle 1 Purchases of merchandise 2 Sales of merchandise 3 Collection of receivables Merchandising v manufacturing Merchandisers include retailers and wholesalers Merchandiser Includes p 197 Revenue Less CGS 9 cost incurred to purchase merchandise Gross Pro t LessEXpenses Net Income Subsidiary ledger separate account for each ofthe items included in the balance of a general ledger account eg account receivables subledger shows receivables by customer controlling account general ledger account which summarizes a subledger thus entries affecting subledger must be posted twice 1 Subledger 2 General ledger 2 approaches may be used for merchandise transactions 1 Perpetual inventory system big business 2 Periodic inventory system small business 1 Perpetual Inventory Transactions are recorded as they occur a Purchase merchandise Inventory Accounts payable b Sale of merchandise Accounts receivable Sales Cost of goods sold Inventory c Payment of accounts payable to suppliers Accounts payable Cash d Collection of accounts receivable Cash Accounts receivable Inventory subledger for separate product inventory shrinkage unrecorded decreases in inventory from breakage spoilage employee theft and shoplifting Thus 9 take a physical inventory at least once a year and any difference from ledger Cost of goods sold Inventory 2 Periodic Inventory Inventory amounts are determined periodically usually year end a Purchase merchandise Purchases Accounts payable b Sale of Merchandise Accounts receivable Sales c Computer Cost of goods sold Inventory beginning Purchases CGAS Less InventomEnd Cost of Goods Sold d During closing procedures inventory Cost of Goods Sold recorded Cost of goods Sold Inventory Beginning Purchases Inventory End Cost of Goods Sold 9 Note remainder of closing entries is same as chapter 3 Selecting an Inventory System see page 209 Evaluating Performance of Merchandise Company 1 Net Sales gross sales refunds or discounts 2 Gross profit margin amount of gross pro t expressed as a of net sales 9 Can be computed overall department undivided products or per unit Additional Merchandising Transactions Purchases 9 Assume perpetual inventory system here 1 Credit terms and cash discounts When products sold on account many offer discounts of payment made before due eg 210 n30 9 full payment due in 30 days but 2 discount if payment within 10 days a Recorded purchases at net cost Inventory Accounts payable Payment made on time Accounts payable Cash Payment made after discount allowed Accounts payable Purchase discount lost 9 expense account Cash b Record purchases at gross Inventory Accounts payable If payment made in discount period Accounts payable Cash Purchase discounts taken 9 reduces Cost of goods sold 2 Returns of Unsatisfactory merchandise Accounts payable Inventory 3 Transportation Cost on Purchases Transportation costs to purchase inventor are part of cost of asset not current expenses Transportation in 9 purchaser pays transportation If notable to assign transportation costs to each product then transportation in is usually included in Cost of Goods Sold 4 Accenting for Sales Tax Sales tax imposed on consumer not seller but seller must collect and remit Cash Sales tax payable Sales Additional Sales Transactions Sales shown on Income Statement Sales Less R ampA Discounts Net Sales 1 Sales R A Sales R A 9 contra revenue account Accounts Receivable or Cash Inventory Cost of Goods Sold 2 Sales Discounts Sales recorded at gross Accounts Receivable Sales If payment made within discount period Cash Sales Discounts 9 contra revenue account Accounts receivable 3 Delivery expense ls seller incurs expense Delivery expense 9 operation expense not Cost of Goods sold Cash


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