Ch 04 - 1 LEARNING OBJECTIVE 1 Distinguish activities&...

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Unformatted text preview: 1 LEARNING OBJECTIVE 1 Distinguish activities & financial statements of a service business from a merchandising business. 2 SERVICE VS. MERCHANDISING BUSINESS Service firms sell services Examples: Family Health Care, PC H&R Block LO 1 Continued 3 SERVICE VS. MERCHANDISING BUSINESS Merchandising firms sell products Must buy products to sell Gross profit = Net sales – Cost of Goods Sold Examples: Home Depot Netsolutions K-Mart / WalMart HEB LO 1 Accounts Used for Merchandise Sales Accounting F i n a n c i a l S t a t e m e n t E f f e c t A c c o u n t P u r p o s e I n c o m e S t a t e m e n t B a l a n c e S h e e t S a l e U s e d t o r e c o r d s a l e s r e v e n u e w h e n a s a l e i s m a d e t o a c a s h o r c r e d i t c u s t o m e r I n c r e a s e t o n e t i n c o m e ( T h r o u g h t h e I n c o m e S t a t e m e n t , i n d i r e c t l y i n c r e a s e s r e t a i n e d e a r n i n g s ) S a l e s R e t u r n s & A l l o w a n c e s U s e d t o r e c o r d c a s h o r c r e d i t r e f u n d g i v e n w h e n c u s t o m e r s r e t u r n m e r c h a n d i s e D e c r e a s e t o s a l e s a n d n e t i n c o m e ( T h r o u g h t h e I n c o m e S t a t e m e n t , i n d i r e c t l y d e c r e a s e s r e t a i n e d e a r n i n g s ) S a l e s D i s c o u n t s U s e d t o r e c o r d d i s c o u n t s g r a n t e d t o a c u s t o m e r f o r p a y i n g a n a c c o u n t w i t h in a d i s c o u n t p e r i o d ( e .g ., 2 / 1 0 , n e t / 3 0 t e r m s ) D e c r e a s e t o s a l e s a n d n e t i n c o m e ( T h r o u g h t h e I n c o m e S t a t e m e n t , i n d i r e c t l y d e c r e a s e s r e t a i n e d e a r n i n g s ) C o s t o f M e r c h a n d i s e S o l d U s e d t o r e c o r d t h e c o s t o f i n v e n t o r y i t e m s s o l d t o c u s t o m e r s ; a s a n “ o f f s e t ” , t h e i n v e n t o r y i t e m s s o l d a r e r e m o v e d f r o m t h e M e r c h a n d i s e I n v e n t o r y A c c o u n t D e c r e a s e t o n e t i n c o m e ( T h r o u g h t h e I n c o m e S t a t e m e n t , i n d i r e c t l y d e c r e a s e s r e t a i n e d e a r n i n g s ) S a l e s T a x P a y a b l e U s e d t o r e c o r d s a l e s t a x e s c o l l e c t e d f r o m c u s t o m e r s...
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This note was uploaded on 05/01/2008 for the course ACC 2301 taught by Professor Staff during the Spring '08 term at Texas State.

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Ch 04 - 1 LEARNING OBJECTIVE 1 Distinguish activities&...

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