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252S07Ch5Slides_Student - Financial Accounting Tools for...

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Unformatted text preview: Financial Accounting: Tools for Business Decision Making, 4th Ed. Kimmel, Weygandt, Kieso CHAPTER 5 MERCHANDISING OPERATIONS AND THE MULTIPLESTEP INCOME STATEMENT Prepared by Ellen L. Sweatt Georgia Perimeter College Edited for classroom use 1/2007 1 Income Measurement for Merchandise Companies Inventory Systems - Perpetual Compute and record Cost of goods sold Maintain detailed records of __________________ Cost of goods sold is determined ______________ Purchase of Merchandise Sauk purchased $ 3,800 of goods on account. Merchandise Inventory Accounts Payable Merchandise Inventory • Includes ____________________________________ ____________________________________ • Does not include ____________________________________ 5 Purchase Returns and Allowances Purchase Return – A return of the goods from the buyer or seller for ______________ Purchase Allowance – A reduction made in the selling price of the merchandise, granted by the seller so that the buyer ______________________________________ 6 Return of Merchandise Sauk Stereo returned goods costing $ 300 to PW Audio. Merchandise Inventory May 4 3,800 Accounts Payable May 4 3,800 Freight Costs… • On ____________you purchase are charged to ____________ • On _____________ you sell are an ______________ to the seller. 8 Freight Cost - Buying Goods for Inventory Merchandise Inventory Cash May 4 3,800 May 8 300 Freight Cost – Selling Goods to Customers Freight-out Cash Purchase Discounts • Credit terms ______ allow buyer to claim a ________________ if payment is made ____________ • Purchaser saves money and seller __________________________ __________________________ 10 Purchase Discounts Credit terms may be written“2/10, net 30” Credit terms may be written“1/10, EOM” 11 Purchase Discounts Original Invoice $ Return on May 8 ______ Amount due before discount $ 2% discount ______ Net due $ 12 Purchase Discounts Merchandise Inventory Cash Accounts Payable May 4 3,800 May 8 300 150 May 9 13 Recording Sales Under Perpetual Inventory System • Sales revenues recorded _____________________ _____________________ • Follows _____________________ • Every purchase should be supported by _____________________ _____________________ 14 3 11 Recording Sales Under Perpetual Inventory System Two entries required: One for Sales- may be on credit or cash One to record Cost of Goods Sold Same invoice as before, but now we are the seller (PW Audio) and goods cost us $2,400 15 Sales Returns and Allowances- flip side of Purchase Returns and Allowances Same return as before, but now we are the seller and goods cost us $140. 16 Sales Returns and Allowances • Contra-revenue account • Normal balance is debit • Are kept in this separate account so you know exactly how much you allowed in returns and allowances 17 Sales Returns and Allowances What do excessive returns and allowances suggest? 18 Sales Discounts Credit terms may allow ________to claim a ___________ for _______________ Sales Discount is a __________account of sales. Normal _________ Credit terms 2/10,n/30- Seller’s Books 19 Comparison of Perpetual to Periodic Buyer Seller 20 4 11 Single-step and and Multiplestep Income Statements Single-step – total revenues minus total expenses; simple, easy to read Multi-step – highlights components and distinguishes activities 21 Cost of Goods Sold 22 23 6 11 Evaluating Profitability • Gross Profit Rate • Profit Margin Ratio 24 Reasons Gross Profits Rates Change 25 Evaluate Profits Margins 26 ...
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This note was uploaded on 04/05/2008 for the course ACCT 252 taught by Professor Mills during the Spring '08 term at NMSU.

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