Chapter 4 Outline.docx - Chapter 4 Outline Accounting for a...

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Chapter 4 Outline Accounting for a Merchandising Business 1) What Are the Relationships Among Manufacturers, Wholesalers, Retailers, and Customers? a. Merchandise businesses buy/sell products instead of services. Two types: i. Wholesaler- purchase products from manufacturers, resell to retailers ii. Retailer- buys from manufacturers/wholesalers, resell to public 1. Ex: Walmart 2) How Do Periodic and Perpetual Inventory Systems Differ? a. Periodic inventory system i. Beginning inventory + Purchases = Cost of Goods – Ending Inventory = Cost of Goods Sold b. Perpetual inventory system i. Running record of inventory as it is bought and sold ii. Physically counts inventory once a year iii. Debit/credit inventory account in general ledger as needed. Offsetting debit/credit cost of goods account 3) How Do You Account for the Purchase of Inventory? a. 4) How Do You Account for the Sale of Inventory? a. Cash Sales- goods are sold for cash i. Increase asset, increase sales rev ii. Reduces inventory, increases cost of goods sold account iii. When a product is sold, merchandisers recognize: 1.
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