Accg105 Lecture week 8 2009S3 Inventory

Accg105 Lecture week 8 2009S3 Inventory - Lecture Week 8...

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1 Lecture Week 8 Accg105 Introductory Financial Accounting
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2 Topics to cover this week: Merchandiser Perpetual and periodic inventory systems Recording purchases and sales of inventory Conservatism/prudence
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Merchandiser A merchandiser or retailer earns revenue by buying and selling goods or merchandise. The amount of goods or merchandise on hand is called inventory or stock on hand. Inventory includes all goods that the business owns and expects to sell in the normal course of operations. 3
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Merchandiser Income Statement items Sales revenue or sales: the amount earned from selling inventory Net sales: sales revenue minus any sales returns and allowances Cost of Goods Sold (COGS): also called Cost of Sales, is the cost of inventory that has been sold, it is an expense item. 4
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Merchandiser Income Statement items Before inventory is sold, i.e. inventory on hand, it is an asset. When inventory is sold, it becomes an expense (COGS). Key performance indicators such as the gross profit (gross margin) and inventory turnover are used as measures of inventory efficiency and they are a key to profitability. 5
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Merchandiser Income Statement items The gross profit or gross margin is the excess of sales revenue over COGS. ‘Gross’ profit means before operating expenses. By contrast, the ‘net’ profit amount is calculated after subtracting all expenses from gross profit. 6
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Merchandiser Brief overview of GST Goods and Services Tax (GST) is a tax levied on the supply of goods and services. A business registered for GST collects the tax on the goods and services it sells and pays tax on the goods and services it buys. 7
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It then deducts the amount of tax it has paid from the amount of tax it has collected and pays the balance amount to the ATO (in cases where the amount collected is larger than the amount paid). If the amount of GST paid is larger
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Accg105 Lecture week 8 2009S3 Inventory - Lecture Week 8...

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