Course Hero Logo

Ch. 5 Lecture upload to canvas .pptx - CHAPTER 5 Accounting...

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 1 - 14 out of 40 pages.

CHAPTER 5Accounting for Merchandising Operations
Distributionof ProductstoIndividualConsumersRetailers- buy products fromwholesalers and resell to individualconsumersWholesalers- buy finished productsfrom manufacturing firms in largequantities and sell the product insmaller quantitiesManufacturers– convert rawmaterials into finished products
Merchandising FirmWholesalersBusiness-to-business transaction“B2B”: Manufacturers typically only selltheir products to wholesalersRetailersBusiness-to-consumer transaction“B2C”: Retailers typically buy productsfrom wholesalers
Operating Cycle –Merchandising Company1.Purchase merchandiseInventory2.Sell merchandise inventory to customersAccounts receivable3.Receive cash from customersCash
Operating Cycle – Service FirmPerform serviceAccounts receivablePayment fromcustomerCash
Cost Flows
InventorySystemsPerpetual Inventory SystemPeriodic Inventory SystemMain difference is the timing of when cost ofmerchandise inventory sold is calculated
PerpetualinventorysystemCost of goods sold (COGS) is calculated afterevery saleInventory balance is kept up to dateconstantlyProvides greater control over inventoryBetter able to determine theft or spoilageMost commonly used by merchandisingfirms
Periodic inventorysystemCost of goods sold (COGS) is calculated “periodically” whena physical count of inventory is takenActual balance of inventory is unknown until the periodiccountPhysical inventory count- Time consuming and usuallyoccurs only at the end of the fiscal period
ACCOUNTING FORPURCHASES OFMERCHANDISE
Accounting for Purchases of MerchandisePerpetual Inventory SystemDebit Inventory for the acquisition cost and either:Credit Cash if the purchase is for cash, orCredit Accounts Payable if the purchase is on account
Example:On November 10thKali Company purchases 200 cameras on account for resale tocustomers. The cost of the cameras is $42,000.Inventory (+A)42,000Accounts Payable (+L)42,000To record the purchase of 200 cameras for resale
Transportation CostsAll costs incurred to get themerchandise ready for resale areincluded in the cost of inventory.Example: Kali Company pays $200 inshipping costs related to the 200cameras purchased.

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 40 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Spring
Professor
HANCOCK
Tags
Revenue, Generally Accepted Accounting Principles, Kali Company

Newly uploaded documents

Show More

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture