6.docx - Chapter 5 Accounting for Merchandising Operations...

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2/14/18 & 2/16/18 Chapter 5. Accounting for Merchandising Operations Merchandising Operations o Operation cycles Merchandising company is longer than service company Service company: receive cash perform services accounts receivable Merchandising company: receive cash buy inventory sell inventory account receivable o Flow of cost Perpetual system Maintain detailed records of cost of each inventory & sale Records continuously for inventory on hand Company determines cost of goods sold each time a sale occurs Periodic inventory systems Do not keep details of records Physical inventory count is made to determine the cost Calculation of cost of goods: beginning inventory + net purchases – ending inventory = cost of goods sold o Advantages of the perpetual system Used for merchandise with high unit values Show the quantity & cost of the inventory that should be on hand at any time Better control
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