View
215
Download
0
Tags:
Embed Size (px)
Citation preview
Copyright © 2007 Prentice-Hall. All rights reserved 1
Merchandising OperationsMerchandising OperationsMerchandising OperationsMerchandising Operations
Chapter 5
Copyright © 2007 Prentice-Hall. All rights reserved 2
Merchandising OperationsMerchandising OperationsMerchandising OperationsMerchandising Operations
• Buying and selling products
Copyright © 2007 Prentice-Hall. All rights reserved 3
Objective 1Objective 1Objective 1Objective 1
Account for the purchase of inventory
Copyright © 2007 Prentice-Hall. All rights reserved 4
Cash
Inventory
AccountsReceivable
PurchaseSe
ll
Collect
Operating Cycle of a Operating Cycle of a Merchandising BusinessMerchandising Business
Operating Cycle of a Operating Cycle of a Merchandising BusinessMerchandising Business
Copyright © 2007 Prentice-Hall. All rights reserved 5
Inventory SystemsInventory SystemsInventory SystemsInventory Systems
• Periodic
• Perpetual
Copyright © 2007 Prentice-Hall. All rights reserved 6
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT
Purchase of Inventory Purchase of Inventory S5-1S5-1
Inventory 10,000
Accounts Payable 10,000
Purchased inventory
Copyright © 2007 Prentice-Hall. All rights reserved 7
Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
• A deduction from the invoice price granted to encourage early payment of the amount due– 2/10, n/30– n/30– eom
Credit terms 2/10, n/30 means 2% discount if paid within 10 days. If the discount period is missed, the full amount is due within 30 days.
This decreases the cost of the inventory.
Copyright © 2007 Prentice-Hall. All rights reserved 8
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Purchase of Inventory Purchase of Inventory S5-2S5-2
Accounts Payable 10,000
Cash 9,800
Inventory 200
Paid within discount period
10,000
Inventory
200
Bal 9,800
Discount = $10,000 x 2% = $200
Copyright © 2007 Prentice-Hall. All rights reserved 9
Purchase Returns and Purchase Returns and AllowancesAllowances
Purchase Returns and Purchase Returns and AllowancesAllowances
• Purchase Return - Merchandise returned by the purchaser to the supplier
• Purchase Allowance - A reduction in the cost of defective merchandise received by a purchaser from a supplier
Copyright © 2007 Prentice-Hall. All rights reserved 10
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT
Purchase Returns and Purchase Returns and Allowances – S5-2Allowances – S5-2
Inventory 100,000
Accounts Payable 100,000
Purchased inventory
Copyright © 2007 Prentice-Hall. All rights reserved 11
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Purchase Returns and Purchase Returns and Allowances – S5-2Allowances – S5-2
Accounts Payable 10,000
Inventory 10,000
Returned damaged goods
100,000
Inventory
10,000
Bal 90,000
100,000
Accounts Payable
10,000
Bal 90,000
Copyright © 2007 Prentice-Hall. All rights reserved 12
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Purchase Returns and Purchase Returns and Allowances – S5-2Allowances – S5-2
Accounts Payable 90,000
Cash 90,000
Paid after the discount period
100,000
Inventory
10,000
Bal 90,000
100,000
Accounts Payable
10,000
Bal 0
90,000
Part a. If this is paid after the discount period, the company must pay the full invoice price less the return
Copyright © 2007 Prentice-Hall. All rights reserved 13
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Purchase Returns and Purchase Returns and Allowances – S5-2Allowances – S5-2
Accounts Payable 90,000
Cash 87,300
Inventory 2,700
Paid within discount period
100,000
Inventory
10,000
Bal 87,300
2,700 100,000
Accounts Payable
10,000
Bal 0
90,000
Part b: If paid within the discount period. Discount = $90,000 x 3% = $2,700
Copyright © 2007 Prentice-Hall. All rights reserved 14
Transportation CostsTransportation Costs
FOB Shipping Point(Buyer Pays)
FOB Destination(Seller Pays)
Seller
Goods
Buyer
Copyright © 2007 Prentice-Hall. All rights reserved 15
Transportation CostsTransportation CostsTransportation CostsTransportation Costs
• Freight in– Transportation cost on purchased goods– Debit inventory
• Freight-out– Transportation cost on goods sold– Debit an expense (delivery expense)
Copyright © 2007 Prentice-Hall. All rights reserved 16
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT
E5-15E5-15
Apr 30 Inventory 6,000
Accounts Payable 6,000
Purchased inventory
Copyright © 2007 Prentice-Hall. All rights reserved 17
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT
E5-15E5-15
Apr 30 Inventory 300
Cash 300
Paid freight charges
6,000
Inventory
300
Bal 6,300
6,000
Accounts Payable
Copyright © 2007 Prentice-Hall. All rights reserved 18
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
E5-15E5-15
Apr 30 Accounts Payable 1,000
Inventory 1,000
Returned unsuitable goods
6,000
Accounts Payable
1,000
Bal 5,000
6,000
Inventory
300
Bal 5,300
1,000
Copyright © 2007 Prentice-Hall. All rights reserved 19
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
E5-15E5-15
May14 Accounts Payable 5,000
Cash 4,850
Inventory 150
Paid within discount period
6,000
Accounts Payable
1,000
Bal 0
5,000 6,000
Inventory
300
Bal 5,150
1,000 150
Discount = $5,000 x 3% = $150Remember, do not compute the discount on the freight charges….only the invoice price
Copyright © 2007 Prentice-Hall. All rights reserved 20
Objective 2Objective 2Objective 2Objective 2
Account for the sale of inventory
Copyright © 2007 Prentice-Hall. All rights reserved 21
Sale of InventorySale of InventorySale of InventorySale of Inventory
• Sales Revenue– Amount earned from selling inventory– Revenue account
• Cost of Goods Sold– Cost of inventory that has been sold to
customers– Expense account
Copyright © 2007 Prentice-Hall. All rights reserved 22
Sale of InventorySale of InventorySale of InventorySale of Inventory
• Sales Returns & Allowances – When customer returns goods or the seller
grants a reduction in price to customer– Contra-revenue account (debit balance)
• Sales Discounts– If customer pays within the discount period
allowed by the seller– Contra-revenue account (debit balance)
• Delivery Expense (Freight Out)
Copyright © 2007 Prentice-Hall. All rights reserved 23
Sales TransactionsSales TransactionsS5-5S5-5
Sales TransactionsSales TransactionsS5-5S5-5
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Accounts Receivable 60,000
Sales Revenue 60,000
To record sales on account
Cost of Goods Sold 32,000
Inventory 32,000
To record cost of sales
Remember, there are always two entries to record a sale when using
the perpetual inventory system. One to record the selling price to the customer and the second to remove the inventory from your
books at the amount your company paid to acquire it
Copyright © 2007 Prentice-Hall. All rights reserved 24
Sales TransactionsSales TransactionsS5-5S5-5
Sales TransactionsSales TransactionsS5-5S5-5
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Cash 60,000
Accounts Receivable 60,000
Collected on account
What if there were no credit terms allowed?
Copyright © 2007 Prentice-Hall. All rights reserved 25
Sales TransactionsSales TransactionsS5-5S5-5
Sales TransactionsSales TransactionsS5-5S5-5
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Cash 58,800
Sales Discount 1,200
Accounts Receivable 60,000
Collected on account
Copyright © 2007 Prentice-Hall. All rights reserved 26
Sales TransactionsSales TransactionsS5-5S5-5
Sales TransactionsSales TransactionsS5-5S5-5
Sales $60,000
Sales Discount (1,200)
Net Sales $58,800
Copyright © 2007 Prentice-Hall. All rights reserved 27
S5-6S5-6S5-6S5-6
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Accounts Receivable 10,000
Sales Revenue 10,000
To record sales on account
Cost of Goods Sold 6,000
Inventory 6,000
To record cost of sales
Copyright © 2007 Prentice-Hall. All rights reserved 28
S5-6S5-6S5-6S5-6
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Sales Returns & Allowances 1,000Accounts Receivable 1,000
To record 100 books returned
Inventory 600
Cost of Goods Sold 600Returned books to inventory
When merchandise is returned, you also have two entries
Copyright © 2007 Prentice-Hall. All rights reserved 29
S5-6S5-6S5-6S5-6
Sales Discounts
1,000
Sales Returns & Allowances
Bal 1,000
Sales
10,000 10,000
Accounts Receivable
Bal 9,000
1,000
Copyright © 2007 Prentice-Hall. All rights reserved 30
S5-6S5-6S5-6S5-6
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Cash 8,820
Sales Discount 180
Accounts Receivable 9,000
Collected on account
Copyright © 2007 Prentice-Hall. All rights reserved 31
S5-6S5-6S5-6S5-6
Sales Discounts
1,000
Sales Returns & Allowances
Bal 1,000
Sales
10,000 10,000
Accounts Receivable
Bal 0
1,000
180Bal 180
9,000
6,000
Cost of Goods Sold
Bal 5,400
600
Copyright © 2007 Prentice-Hall. All rights reserved 32
S5-7S5-7S5-7S5-7
Sales $10,000
Sales Returns & Allowances (1,000)
Sales Discounts (180)
Net Sales $8,820
Cost of Goods Sold (5,400)
Gross Profit $3,420
Copyright © 2007 Prentice-Hall. All rights reserved 33
Objective 3Objective 3Objective 3Objective 3
Adjust and close the accounts of a merchandising business
Copyright © 2007 Prentice-Hall. All rights reserved 34
Adjusting InventoryAdjusting InventoryAdjusting InventoryAdjusting Inventory
• If physical count of inventory is different from amount on the books – Inventory Shrinkage
• Debit Cost of Goods Sold
• Credit Inventory
Copyright © 2007 Prentice-Hall. All rights reserved 35
S5-8S5-8S5-8S5-8
GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT
Cost of Goods Sold 1,100
Inventory 1,100
Adjustment for shrinkage
$65,000 (per books) - 63,900 (physical count) $1,100 (shrinkage)
Copyright © 2007 Prentice-Hall. All rights reserved 36
Closing EntriesClosing EntriesClosing EntriesClosing Entries
1. Close all income statement accounts with credit balances to Income Summary
2. Close all income statement accounts with debit balances to Income Summary
3. Close Income Summary to Capital
4. Close Withdrawals to Capital
Copyright © 2007 Prentice-Hall. All rights reserved 37
S5-9S5-9S5-9S5-9GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT
Dec 31 Sales Revenue 700,000
Income Summary 700,000
31 Income Summary 424,000
Cost of Goods Sold 385,000
Rent Expense 20,000Depreciation Expense 10,000
Sales Discounts 9,000
Copyright © 2007 Prentice-Hall. All rights reserved 38
S5-9S5-9S5-9S5-9GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT
Dec 31 Income Summary 276,000
J. Hayes, Capital 276,000
(700,000 – 424,000)
31 J. Hayes, Capital 60,000
J. Hayes, Withdrawals 60,000
Copyright © 2007 Prentice-Hall. All rights reserved 39
Objective 4Objective 4Objective 4Objective 4
Prepare a merchandiser’s financial statements
Copyright © 2007 Prentice-Hall. All rights reserved 40
Income StatementIncome StatementIncome StatementIncome Statement
Net sales - Cost of goods sold
Gross profit - Operating expenses:
Selling expenses – related to selling and marketing the inventory
General expense – office expensesOperating income
+ Other revenue and expenseNet income
Copyright © 2007 Prentice-Hall. All rights reserved 41
Income Statement FormatsIncome Statement FormatsIncome Statement FormatsIncome Statement Formats
• Multiple-Step – see previous slide– Contains key subtotals
• Single-Step– Total revenues minus total expenses
Copyright © 2007 Prentice-Hall. All rights reserved 42
S5-10S5-10S5-10S5-10Carolina Communications
Income StatementFor the Year Ended January 31, 2009
Net Sales Revenue $25,000
Cost of Goods Sold 20,000
Gross Profit $5,000
Operating Expenses 3,500
Net Income $1,500
Multiple step has key subtotal, gross profit
Copyright © 2007 Prentice-Hall. All rights reserved 43
S5-10S5-10S5-10S5-10Carolina Communications
Income StatementFor the Year Ended January 31, 2009
Net Sales Revenue $25,000
Cost of Goods Sold $20,000
Operating Expenses 3,500 23,500
Net Income $1,500
Single step combines all expenses
Copyright © 2007 Prentice-Hall. All rights reserved 44
Objective 5Objective 5Objective 5Objective 5
Use gross profit percentage and inventory turnover to evaluate a
business
Copyright © 2007 Prentice-Hall. All rights reserved 45
Gross Profit PercentageGross Profit Percentage
Percentage of dollar sales available to cover expenses and provide a profit
Gross Profit Net Sales
Copyright © 2007 Prentice-Hall. All rights reserved 46
Rate of Inventory TurnoverRate of Inventory TurnoverRate of Inventory TurnoverRate of Inventory Turnover
Cost of goods sold
Average inventory
Average inventory =
(Beg inventory + End inventory) / 2
How rapidly is inventory sold?
Copyright © 2007 Prentice-Hall. All rights reserved 47
E5-25E5-25E5-25E5-25
Net sales $65Cost of sales (33)Gross profit $32
Gross profit percentage:
Gross Profit
Net Sales
= $32
$65
= 49%
Copyright © 2007 Prentice-Hall. All rights reserved 48
E5-25E5-25E5-25E5-25
Inventory Turnover:
= $33 $(4 + 3)/2
= 9.4 timesCost of goods soldAverage inventory
Copyright © 2007 Prentice-Hall. All rights reserved 49
Objective 6Objective 6Objective 6Objective 6
Compute cost of goods sold in a periodic inventory system
Copyright © 2007 Prentice-Hall. All rights reserved 50
Cost of Goods Sold – Periodic Cost of Goods Sold – Periodic Inventory SystemInventory System
Cost of Goods Sold – Periodic Cost of Goods Sold – Periodic Inventory SystemInventory System
Beginning Inventory
+ Purchases
Goods Available for Sale
Copyright © 2007 Prentice-Hall. All rights reserved 51
Cost of Goods Sold – Periodic Cost of Goods Sold – Periodic Inventory SystemInventory System
Cost of Goods Sold – Periodic Cost of Goods Sold – Periodic Inventory SystemInventory System
Goods Available for Sale
- Ending Inventory
Cost of Goods Sold
Copyright © 2007 Prentice-Hall. All rights reserved 52
Cost of Goods Sold – Periodic Cost of Goods Sold – Periodic Inventory SystemInventory System
Cost of Goods Sold – Periodic Cost of Goods Sold – Periodic Inventory SystemInventory System
Beginning Inventory
+ Purchases
Goods Available for Sale
- Ending Inventory
Cost of Goods Sold
Copyright © 2007 Prentice-Hall. All rights reserved 53
E5-26E5-26E5-26E5-26
a. Sales $170,000
Sales discounts (3,000)
Sales returns (15,000)
Net sales $152,000
Copyright © 2007 Prentice-Hall. All rights reserved 54
E5-26E5-26E5-26E5-26
b. Inventory, May 31, 20X6 $19,000
Purchases $82,000
Purchases discounts (2,000)
Purchases returns (8,000)
Freight in 4,000
Net purchases 76,000
Goods available for sale $95,000
Inventory, May 31, 20X7 (21,000)
Cost of goods sold $74,000
Copyright © 2007 Prentice-Hall. All rights reserved 55
E5-26E5-26E5-26E5-26
c. Net sales
$152,000
Cost of goods sold
(74,000)
Gross profit
$78,000
Copyright © 2007 Prentice-Hall. All rights reserved 56
End of Chapter 5End of Chapter 5End of Chapter 5End of Chapter 5