tailieunhanh - Lecture Financial and managerial accounting (12/e): Chapter 6 – Williams, Haka, Bettner, Meigs

Chapter 6 – Accounting for merchandising activities. After reading the material in this chapter, you should be able to: Describe the operating cycle of a merchandising company, define subsidiary ledgers and explain their usefulness, account for purchases and sales of merchandise in a perpetual inventory system, explain how a periodic inventory system operates,. | ACCOUNTING FOR MERCHANDISING ACTIVITIES Chapter 6 2 Operating Cycle of a Merchandising Company 1. Purchase of merchandise 3. Collection of the receivables 2. Sale of merchandise on account Cash Inventory Accounts Receivable Comparing Merchandising Activities with Manufacturing Activities Merchandising Company Purchase inventory in ready-to-sell condition. Manufacturing Company Manufacture inventory and have a longer and more complex operating cycle Retailers and Wholesalers Retailers sell merchandise directly to the public. Wholesalers buy merchandise from several different manufacturers and then sell this merchandise to several retailers. 4 Income Statement of a Merchandising Company Cost of goods sold represents the expense of goods that are sold to customers. Gross profit is a useful means of measuring the profitability of sales transactions. 4 What Accounting Information Does a Merchandising Company Need? Financial Reporting Requirements Daily Business Operating Requirements Special Reporting Requirements Examples Revenues Expenses Customer Ledgers Tax Reports 4 General Ledger Accounts Although general ledger accounts provide useful information, they do not provide much of the detailed information needed in the daily business operations. Who owes us money? 4 Subsidiary Ledgers: A Source of Needed Details Controlling Account 4 4 Two Approaches Used in Accounting for Merchandise Transactions Perpetual Inventory System Periodic Inventory System 4 Perpetual Inventory System The inventory account is continuously updated to reflect items on hand. Let’s look at some entries! 4 Perpetual Inventory System On September 5, Worley Co. purchased 100 laser lights for resale for $30 per unit from Electronic City on account . Perpetual Inventory System On September 10, Worley Co. sold 10 laser lights for $50 per unit on account to ABC Radios. 10 ´ $30 = $300 Perpetual Inventory System Cost Retail On September 10, Worley Co. sold 10 laser lights for $50 per unit on account | ACCOUNTING FOR MERCHANDISING ACTIVITIES Chapter 6 2 Operating Cycle of a Merchandising Company 1. Purchase of merchandise 3. Collection of the receivables 2. Sale of merchandise on account Cash Inventory Accounts Receivable Comparing Merchandising Activities with Manufacturing Activities Merchandising Company Purchase inventory in ready-to-sell condition. Manufacturing Company Manufacture inventory and have a longer and more complex operating cycle Retailers and Wholesalers Retailers sell merchandise directly to the public. Wholesalers buy merchandise from several different manufacturers and then sell this merchandise to several retailers. 4 Income Statement of a Merchandising Company Cost of goods sold represents the expense of goods that are sold to customers. Gross profit is a useful means of measuring the profitability of sales transactions. 4 What Accounting Information Does a Merchandising Company Need? Financial Reporting Requirements Daily Business Operating Requirements .

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