Chapter 4 Accounting for Merchandising Businesses.
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Transcript of Chapter 4 Accounting for Merchandising Businesses.
![Page 1: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/1.jpg)
Chapter 4Chapter 4
Accounting for Merchandising Accounting for Merchandising BusinessesBusinesses
Accounting for Merchandising Accounting for Merchandising BusinessesBusinesses
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Learning ObjectivesLearning Objectives
After studying this chapter, you should be able to… Distinguish the activities and financial statements of a service
business from those of a merchandising business Describe and illustrate the financial statements of a
merchandising business Describe the accounting for the sale of merchandise Describe the accounting for the purchase of merchandise Describe the accounting for transportation costs and sales taxes Illustrate the dual nature of merchandising transactions Describe the accounting for merchandise shrinkage
![Page 3: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/3.jpg)
Learning Objective 1Learning Objective 1
Distinguish the activities and financial statements of a service business from
those of a merchandising business
![Page 4: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/4.jpg)
Service Businesses vs. Merchandise Operations
• Merchandise Operations– Revenue activities involve the buying
and selling of merchandise.– Example: Home Depot Inc.
• Service Businesses– Revenue activities involve providing
services to customers.– Example: Family Health Care, P.C.
![Page 5: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/5.jpg)
Gross Profit for a Merchandise Operation
Gross Profit = Net Sales – COGSGross Profit = Net Sales – COGS
• Net Sales: revenue less returns and discounts
• Cost of Goods Sold: cost paid for merchandise
![Page 6: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/6.jpg)
Learning Objective 2Learning Objective 2
Describe and illustrate the financial statements of a merchandising
business
![Page 7: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/7.jpg)
NetSolutions – Multiple-Step Income Statement
Measures income/loss from the core operations
of the business
Assume a perpetual inventory system
Considers customer
returns and discounts
![Page 8: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/8.jpg)
NetSolutions – Cost of Merchandise Sold – Periodic Inventory
![Page 9: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/9.jpg)
NetSolutions – Income Statement
![Page 10: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/10.jpg)
NetSolutions – Retained Earnings Statement
![Page 11: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/11.jpg)
NetSolutions – Balance Sheet
Value of units on hand, not sold
![Page 12: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/12.jpg)
NetSolutions – Statement of Cash Flows
Equals cash on balance sheet
![Page 13: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/13.jpg)
Learning Objective 3Learning Objective 3
Describe the accounting for the sale of merchandise
![Page 14: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/14.jpg)
NetSolutions - Sales Transactions
![Page 15: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/15.jpg)
Sample Sales Invoice
Credit terms
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Sales Discounts
![Page 17: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/17.jpg)
NetSolutions - Sales Discounts
![Page 18: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/18.jpg)
Sales Returns and Allowances
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NetSolutions - Sales Returns and Allowances
![Page 20: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/20.jpg)
Learning Objective 4Learning Objective 4
Describe the accounting for the purchase of merchandise
![Page 21: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/21.jpg)
Purchase Transaction - Using the Perpetual System
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Purchase Discounts
![Page 23: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/23.jpg)
Purchase Returns and Allowances
![Page 24: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/24.jpg)
NetSolutions - Return of Merchandise
![Page 25: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/25.jpg)
Learning Objective 5Learning Objective 5
Describe the accounting for transportation costs and sales taxes
![Page 26: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/26.jpg)
Transportation Costs
![Page 27: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/27.jpg)
NetSolutions - Transportation Costs
![Page 28: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/28.jpg)
Sales Taxes
Sale is made, liability for sales tax
recorded as an obligation of the
seller
Payment is made to state taxing
authority to satisfy obligation
![Page 29: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/29.jpg)
Learning Objective 6Learning Objective 6
Illustrate the dual nature of merchandising transactions
![Page 30: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/30.jpg)
Dual Nature of Merchandise Transactions
Company A Company A records a salerecords a saleCompany A Company A records a salerecords a sale
Company B Company B records a purchaserecords a purchase
Company B Company B records a purchaserecords a purchase
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Learning Objective 7Learning Objective 7
Describe the accounting for merchandise shrinkage
![Page 32: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/32.jpg)
Merchandise Shrinkage
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NetSolutions - Merchandise Shrinkage
![Page 34: Chapter 4 Accounting for Merchandising Businesses.](https://reader033.fdocuments.us/reader033/viewer/2022061604/5697c0281a28abf838cd6a1e/html5/thumbnails/34.jpg)
End of Chapter 4End of Chapter 4