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6 Accounting for Merchandising Businesses
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Click to edit Master title style Click to edit Master text styles Second level Third level Fourth level » Fifth level Accounting for Merchandising Businesses 1 Distinguish between the activities and financial statements of service and merchandising businesses. 2 Describe and illustrate the financial statements of a merchandising business. 6-2 After studying this chapter, you should be able to: 3 Describe and illustrate the accounting for merchandising transactions including: sale of merchandise; purchase of merchandise; freight, sales taxes, and trade discounts; dual nature of merchandising transactions.
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After studying this chapter, you should be able to: Accounting for Merchandising Businesses (continued) 4 Describe the adjusting and closing process for a merchandising business. 6-3
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Distinguish between the activities and financial statements of service and merchandising businesses. 1 6-4
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6-5 Service Business Fees earned $XXX Operating expenses –XXX Nature of Merchandising Businesses 1
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6-6 Merchandising Business Sales $XXX Cost of Merchandise Sold –XXX Gross Profit $XXX Operating Expenses –XXX Net Income $XXX Nature of Merchandising Businesses 1
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6-7 When merchandise is sold, the revenue is reported as sales, and its cost is recognized as an expense called cost of merchandise sold . 1
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6-8 Merchandise on hand (not sold) at the end of an accounting period is called merchandise inventory . 1
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6-9 1 Gross Profit During the current year, merchandise is sold for $250,000 cash and for $975,000 on account. The cost of the merchandise sold is $735,000. What is the amount of the gross profit ? 6-9 For Practice: PE 6-1A, PE 6-1B Example Exercise 6-1 Follow My Example 6-1 The gross profit is $490,000 ($250,000 + $975,000 – $735,000). Follow My Example 6-1
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6-10 1
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6-11 Describe and illustrate the financial statements of a merchandising business. 2 6-11
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6-12 The multiple-step income statement contains several sections, subsections, and subtotals . 2 Multiple-Step Income Statement
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6-13 2 Exhibit 1 Multiple-Step Income Statement (continued on Slide 19 )
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6-14 The Sales account provides the total amount charged to customers for merchandise sold, including cash sales and sales on account. 2
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6-15 Sales returns and allowances are granted by the seller to customers for damaged or defective merchandise. 2
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6-16 Sales discounts are granted by the seller to customers for early payment of amounts owed. 2
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6-17 Net sales is determined by subtracting sales returns and allowances and sales discounts from sales. 2
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6-18 The cost of merchandise sold is the cost of the merchandise sold to customers. 2
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