FINALS PROJECT ON
ACCOUNTING INFORMATION SYSTEM
(COMAC2-18)
SUBMITTED BY:
ORQUIOLA, ANGELO B.
2BSAIS-3
GROUP - 2
MERCHANDISING
ESSAY
Businesses survive through the complex balancing act between revenue and costs, especially in
industries like apparel and electronics. These sectors differ from service sectors in that they
handle tangible items, which adds another layer of complexity to their financial procedures.
Maintaining economic stability and growth requires an understanding of how these sectors'
income and spending cycles operate. Accompanying the financial journey is the acquisition of
inventory, which starts the cycle. Sellers need to accurately predict what their consumers desire
in order to place orders with suppliers for the right commodities.
This means putting in detailed orders that specify the quantities, prices, and delivery terms. As
soon as items are received, the company registers inventory as an asset and debits the inventory
account. When a purchase is made on credit, accounts payable rise; however, when cash is paid
in advance, the cash account falls. To ensure a complete cost picture, any additional shipping or
insurance charges are added to the inventory value.
Revenue is generated after purchasing inventory and converting inventory into revenue.
Transactions can be made with cash, credit, or a combination of both. In a cash sale, the cash
account is debited and sales are credited, reflecting the immediate exchange of cash for goods.
On the other hand, credit sales involve debiting accounts receivable because customers owe
money to the company. To manage sales returns and discounts, necessary adjustments are made
by debiting sales returns and discounts and crediting the relevant accounts, thereby ensuring
accurate income reporting.
Calculating the cost of goods sold (COGS), which is the direct cost of inventory sold during a
given time, is a crucial part of this cycle. The initial inventory is added to the cost of purchases,
and the final inventory is subtracted to arrive at this figure.
This computation ensures that earnings appropriately represent the expenditures paid by
balancing the cost of purchases with the revenue from sales. Over the course of the cycle,
operating expenses are constant. It is necessary to keep thorough records of all major costs,
including rent, salary, utilities, and depreciation.
Depending on the mode of payment, they are maintained by crediting the accounts payable or
cash accounts and debiting the relevant expenditure accounts. This kind of thorough record-
keeping guarantees that all expenses are paid for and offers a complete picture of the company's
finances.
A fundamental idea in accounting, the matching principle, comes after the revenue and spending
cycle. According to this rule, expenses incurred to produce income must be recorded in the same
accounting period as the income. Businesses may guarantee an accurate image of profits and
prevent distortions brought on by temporal delays by integrating expenditures with related
revenues.
The income statement and balance sheet, two crucial financial reports, are the products of this
painstaking process's conclusion. The income statement provides information on revenue
received, the cost of products sold, and operational costs. Net income, which is a genuine
indicator of a business's financial performance, is the outcome. In contrast, the balance sheet lists
all of the company's assets, liabilities, and shareholders' equity, including accounts payable and
inventory, as well as a summary of the financial situation of the business.
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REVENUE CYCLE
PUREGOLD
This updated flowchart shows a situation for grocery store merchandising. It shows the
procedures involved in processing a customer purchase, from entering the store and choosing
groceries to complete the payment and updating inventory, much like the preceding example did.
The extra step of looking for a membership discount recognizes Pure Gold's possible loyalty
programs.
MERCHANDISING PUREGOLD
EXPENSE CYCLE
PUREGOLD
The expenditure cycle for a Pure Gold merchandising firm is depicted in this flowchart. It goes
on how the business keeps track of supplier purchases, handles regular operating costs, and
handles asset depreciation. The many situations for cash or credit payments during the cycle are
shown in the flowchart.
