Escolar Documentos
Profissional Documentos
Cultura Documentos
5-1
Chapter
Accounting for
Merchandising
Operations
Financial Accounting, IFRS Edition
Weygandt Kimmel Kieso
Slide
5-2
Study
Study Objectives
Objectives
Slide
5-3
1.
2.
3.
4.
5.
6.
Accounting
Accounting for
for Merchandising
Merchandising Operations
Operations
Merchandising
Operations
Operating
cycles
Flow of costs
perpetual
and periodic
inventory
systems
Slide
5-4
Recording
Purchases of
Merchandise
Recording
Sales of
Merchandise
Freight costs
Purchase
returns and
allowances
Purchase
discounts
Summary of
purchasing
transactions
Sales returns
and
allowances
Sales
discounts
Completing
the
Accounting
Cycle
Adjusting
entries
Closing entries
Summary of
merchandising
entries
Forms of
Financial
Statements
Income
statement
Classified
statement of
financial
position
Merchandising
Merchandising Operations
Operations
Merchandising Companies
Buy and Sell Goods
Wholesaler
Retailer
Consumer
Merchandising
Merchandising Operations
Operations
Income Measurement
Sales
Revenue
Less
Not used in a
Service business.
Illustration 5-1
Cost of
Goods Sold
Slide
5-6
Gross
Profit
Less
Operating
Expenses
Net
Income
(Loss)
Merchandising
Merchandising Operations
Operations
Operating
Cycle
Illustration 5-2
The operating
cycle of a
merchandising
company
ordinarily is longer
than that of a
service company.
Slide
5-7
Merchandising
Merchandising Operations
Operations
Flow of Costs
Slide
5-8
Illustration 5-3
Merchandising
Merchandising Operations
Operations
Flow of Costs
Perpetual System
1. Purchases increase Merchandise Inventory.
2. Freight costs, Purchase Returns and Allowances and
Purchase Discounts are included in Merchandise Inventory.
3. Cost of Goods Sold is increased and Merchandise Inventory
is decreased for each sale.
4. Physical count done to verify Merchandise Inventory balance.
The perpetual inventory system provides a continuous record of
Merchandise Inventory and Cost of Goods Sold.
Slide
5-9
Merchandising
Merchandising Operations
Operations
Flow of Costs
Periodic System
1. Purchases of merchandise increase Purchases.
2. Ending Inventory determined by physical count.
3. Calculation of Cost of Goods Sold:
Beginning inventory
$ 100,000
Add: Purchases, net
+ 800,000
Slide
5-10
Slide
5-11
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Illustration 5-5
Slide
5-12
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Under the perpetual inventory system, companies record in the
Merchandise Inventory account the purchase of goods they intend
to sell.
Illustration: From INVOICE NO. 731 (Illustration 5-5) record the
journal entry Sauk Stereo would make to record its purchase from
PW Audio Supply.
May 4
Merchandise inventory
Accounts payable
Slide
5-13
3,800
3,800
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Freight Costs Terms of Sale
Illustration 5-6
Slide
5-14
SO 2
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Illustration: Assume upon delivery of the goods on May 6, Sauk
Stereo pays Acme Freight Company 150 for freight charges, the
entry on Sauk Stereos books is:
May 6
Merchandise inventory
150
Cash
150
Slide
5-15
150
150
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Purchase Returns and Allowances
Purchaser may be dissatisfied because goods are
damaged or defective, of inferior quality, or do not meet
specifications.
Slide
5-16
Purchase Return
Purchase Allowance
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Question
Purchases
b.
Purchase Returns
c.
Purchase Allowance
d.
Merchandise Inventory
Answer on
notes page
Slide
5-17
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Illustration: Assume that on May 8 Sauk Stereo returned
to PW Audio Supply goods costing 300.
May 8
Accounts payable
Merchandise inventory
Slide
5-18
300
300
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Purchase Discounts
Credit terms may permit buyer to claim a cash discount
for prompt payment.
Advantages:
Purchaser saves money.
Seller shortens the operating cycle.
Example: Credit terms of 2/10, n/30, is read two-ten, net thirty.
2% cash discount if payment is made within 10 days.
Slide
5-19
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Purchase Discount Terms
Slide
5-20
2/10, n/30
1/10 EOM
n/10 EOM
2% discount if
paid within 10
days, otherwise
net amount due
within 30 days.
1% discount if
paid within first 10
days of next
month.
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Illustration: Assume Sauk Stereo pays the balance due of
3,500 (gross invoice price of 3,800 less purchase returns and
allowances of 300) on May 14, the last day of the discount
period. Prepare the journal entry Sauk makes to record its May
14 payment.
May 14
Accounts payable
Cash
Merchandise Inventory
Slide
5-21
3,500
3,430
70
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Illustration: If Sauk Stereo failed to take the discount, and
instead made full payment of 3,500 on June 3, the journal entry
would be:
June 3
Accounts payable
Cash
Slide
5-22
3,500
3,500
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Purchase Discounts
Should discounts be taken when offered?
Passing up the discount offered equates to paying an
interest rate of 2% on the use of $3,500 for 20 days.
Example: 2% for 20 days = Annual rate of 36.5%
(365/20 = 18.25 twenty-day periods x 2% = 36.5%)
Slide
5-23
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Summary of Purchasing Transactions
Illustration
4th - Purchase
6th Freight-in
3,800
300
150
70
Balance
3,580
Slide
5-24
8th - Return
14th - Discount
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Illustration 5-5
Slide
5-25
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Two Journal Entries to Record a Sale
#1
#2
Slide
5-26
XXX
XXX
XXX
XXX
Selling
Price
Cost
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Illustration: Assume PW Audio Supply records its May 4 sale of
3,800 to Sauk Stereo (Illustration 5-5) as follows. Assume the
merchandise cost PW Audio Supply 2,400.
May 4
Accounts receivable
3,800
Sales
4
3,800
Slide
5-27
2,400
2,400
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Sales Returns and Allowances
Flipside of purchase returns and allowances.
Contra-revenue account (debit).
Sales not reduced (debited) because:
Slide
5-28
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Illustration: Prepare the entry PW Audio Supply would make to
record the credit for returned goods that had a 300 selling price
(assume a 140 cost). Assume the goods were not defective.
May 8
300
Accounts receivable
8
Merchandise inventory
Cost of goods sold
Slide
5-29
300
140
140
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Illustration: Assume the returned goods were defective and had
a scrap value of 50, PW Audio would make the following entries:
May 8
300
Accounts receivable
8
Merchandise inventory
Cost of goods sold
Slide
5-30
300
50
50
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Review Question
Slide
5-31
a.
b.
c.
d.
Slide
5-32
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Sales Discount
Offered to customers to promote prompt payment.
Flipside of purchase discount.
Contra-revenue account (debit).
Slide
5-33
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Illustration: Assume Sauk Stereo pays the balance due of 3,500
(gross invoice price of 3,800 less purchase returns and
allowances of 300) on May 14, the last day of the discount
period. Prepare the journal entry PW Audio Supply makes to
record the receipt on May 14.
May 14
Cash
3,430
Sales discounts
Accounts receivable
70 *
3,500
Completing
Completing the
the Accounting
Accounting Cycle
Cycle
Adjusting Entries
Generally the same as a service company.
One additional adjustment to make the records agree
with the actual inventory on hand.
Involves adjusting Merchandise Inventory and Cost of
Goods Sold.
Slide
5-35
Completing
Completing the
the Accounting
Accounting Cycle
Cycle
Illustration: Suppose that PW Audio Supply has an unadjusted
balance of 40,500 in Merchandise Inventory. Through a physical
count, PW Audio determines that its actual merchandise inventory
at year-end is 40,000. The company would make an adjusting
entry as follows.
Cost of goods sold
Merchandise inventory
Slide
5-36
500
500
Completing
Completing the
the Accounting
Accounting Cycle
Cycle
Closing
Entries
Slide
5-37
Forms
Forms of
of Financial
Financial Statements
Statements
Income Statement
Primary source for evaluating a companys
performance.
Format designed to differentiate between the various
sources of income and expense.
Slide
5-38
Forms
Forms of
of Financial
Financial Statements
Statements
Income Statement Presentation of Sales
Illustration 5-13
Slide
5-39
Forms
Forms of
of Financial
Financial Statements
Statements
Gross Profit
Illustration 5-13
Illustration 5-10
Slide
5-40
Forms
Forms of
of
Financial
Financial
Statements
Statements
Operating
Expenses
Illustration 5-13
Forms
Forms of
of
Financial
Financial
Statements
Statements
Various revenues
and gains and
expenses and
losses that are
unrelated to the
companys main
line of operations.
Other Income
and Expense
Slide
5-42
SO 5
Illustration 5-13
Forms
Forms of
of
Financial
Financial
Statements
Statements
Interest expense, if
material, must be
disclosed on the
face of the income
statement.
Interest
Expense
Slide
5-43
SO 5
Illustration 5-13
Forms
Forms of
of Financial
Financial Statements
Statements
Comprehensive Income
Includes certain adjustments to pension plan assets, gains and
losses on foreign currency translation, and unrealized gains and
losses on certain types of investments.
Illustration 5-14
Forms
Forms of
of Financial
Financial Statements
Statements
Review Question
Slide
5-45
a.
gross profit.
b.
c.
d.
Forms
Forms of
of Financial
Financial Statements
Statements
Classified Statement of Financial Position
Illustration 5-15
Slide
5-46
Forms
Forms of
of Financial
Financial Statements
Statements
Indicate in which financial statement (Income
Statement, IS; Statement of Financial Position, SFP;
or Retained Earnings Statement, RES) and under what classification
each of the following would be reported.
Slide
5-47
Accounts Payable
SFP
Current liabilities
Accounts Receivable
SFP
Current assets
Accumulated Depreciation
SFP
Advertising Expense
IS
Operating expenses
Depreciation Expense
IS
Operating expenses
Dividends
RES
Deduction section
Cash
SFP
Current assets
Forms
Forms of
of Financial
Financial Statements
Statements
Indicate in which financial statement (Income
Statement, IS; Statement of Financial Position, SFP;
or Retained Earnings Statement, RES) and under what classification
each of the following would be reported.
Slide
5-48
Freight-out
IS
Operating expenses
IS
Insurance Expense
IS
Operating expenses
Interest Expense
IS
Interest expense
Interest Payable
SFP
Current liabilities
Land
SFP
Merchandise Inventory
SFP
Current assets
Forms
Forms of
of Financial
Financial Statements
Statements
Indicate in which financial statement (Income
Statement, IS; Statement of Financial Position, SFP;
or Retained Earnings Statement, RES) and under what classification
each of the following would be reported.
Slide
5-49
Notes Payable
SFP
Non-current liabilities
Office Building
SFP
SFP
Current liabilities
Salaries Expense
IS
Operating expenses
Salaries Payable
SFP
Current liabilities
Sales revenues
Share CapitalOrdinary
Equity
SFP
Forms
Forms of
of Financial
Financial Statements
Statements
Indicate in which financial statement (Income
Statement, IS; Statement of Financial Position, SFP;
or Retained Earnings Statement, RES) and under what classification
each of the following would be reported.
Slide
5-50
Store Equipment
SFP
Sales Revenue
IS
Sales revenues
Utilities Expense
IS
Operating expenses
Understanding
Understanding U.S.
U.S. GAAP
GAAP
Key Differences
Accounting for
Merchandising Operations
Slide
5-51
Understanding
Understanding U.S.
U.S. GAAP
GAAP
Key Differences
Accounting for
Merchandising Operations
Understanding
Understanding U.S.
U.S. GAAP
GAAP
Key Differences
Accounting for
Merchandising Operations
Slide
5-53
Understanding
Understanding U.S.
U.S. GAAP
GAAP
Looking to the Future
Slide
5-54
Accounting for
Merchandising Operations
The IASB and FASB are working on a project that would rework the
structure of financial statements. Specifically, this project will
address the issue of how to classify various items in the income
statement. A main goal of this new approach is to provide
information that better represents how businesses are run. In
addition, this approach draws attention away from just one number
net income. It will adopt major groupings similar to those
currently used by the statement of cash flows (operating, investing,
and financing), so that numbers can be more readily traced across
statements. Finally, this approach would also provide detail,
beyond that currently seen in most statements (either GAAP or
IFRS), by requiring that line items be presented both by function
and by nature.
Periodic
Periodic Inventory
Inventory System
System
Periodic System
Separate accounts used to record purchases, freight
costs, returns, and discounts.
Company does not maintain a running account of
changes in inventory.
Ending inventory determined by physical count.
Slide
5-55
Periodic
Periodic Inventory
Inventory System
System
Calculation of Cost of Goods Sold
Illustration 5A-1
Slide
5-56
Recording
Recording Purchases
Purchases under
under Periodic
Periodic System
System
Illustration: On the basis of the sales invoice (Illustration 5-5) and
receipt of the merchandise ordered from PW Audio Supply, Sauk
Stereo records the 3,800 purchase as follows.
May 4
Purchases
Accounts payable
Slide
5-57
3,800
3,800
Recording
Recording Purchases
Purchases under
under Periodic
Periodic System
System
Freight Costs
Illustration: If Sauk pays Acme Freight Company 150
for freight charges on its purchase from PW Audio Supply on May
6, the entry on Sauks books is:
May 6
Freight-in (Transportation-in)
Cash
Slide
5-58
150
150
Recording
Recording Purchases
Purchases under
under Periodic
Periodic System
System
Purchase Returns and Allowances
Illustration: Sauk Stereo returns 300 of goods to PW Audio
Supply and prepares the following entry to recognize the return.
May 8
Accounts payable
300
Slide
5-59
300
Recording
Recording Purchases
Purchases under
under Periodic
Periodic System
System
Purchase Discounts
Illustration: On May 14 Sauk Stereo pays the balance due on
account to PW Audio Supply, taking the 2% cash discount allowed
by PW Audio for payment within 10 days. Sauk
Stereo records the payment and discount as follows.
May 14
Accounts payable
Purchase discounts
Cash
Slide
5-60
3,500
70
3,430
Recording
Recording Sales
Sales under
under Periodic
Periodic System
System
Illustration: PW Audio Supply, records the sale of 3,800 of
merchandise to Sauk Stereo on May 4 (sales invoice No. 731,
Illustration 5-5) as follows.
May 4
Accounts receivable
Sales
3,800
3,800
Recording
Recording Sales
Sales under
under Periodic
Periodic System
System
Sales Returns and Allowances
Illustration: To record the returned goods received from Sauk
Stereo on May 8, PW Audio Supply records the 300 sales return
as follows.
May 4
Slide
5-62
300
300
Recording
Recording Sales
Sales under
under Periodic
Periodic System
System
Sales Discounts
Illustration: On May 14, PW Audio Supply receives payment of
3,430 on account from Sauk Stereo. PW Audio honors the 2%
cash discount and records the payment of Sauks account
receivable in full as follows.
May 14
Cash
3,430
Sales discounts
Accounts receivable
Slide
5-63
70
3,500
Comparison
Comparison of
of Entries-Perpetual
Entries-Perpetual vs.
vs. Periodic
Periodic
Illustration 5A-2
Slide
5-64
Comparison
Comparison of
of Entries-Perpetual
Entries-Perpetual vs.
vs. Periodic
Periodic
Illustration 5A-2
Slide
5-65
Worksheet
Worksheet for
for aa Merchandising
Merchandising Company
Company
Illustration 5B-1
Slide
5-66
SO 8
Copyright
Copyright
Copyright 2011 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Copyright Act without the
express written permission of the copyright owner is unlawful.
Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser
may make back-up copies for his/her own use only and not for
distribution or resale. The Publisher assumes no responsibility for
errors, omissions, or damages, caused by the use of these
programs or from the use of the information contained herein.
Slide
5-67