Chapter 5
ACCOUNTING FOR
MERCHANDISE OPERATIONS
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
5-2
C2
INVENTORY SYSTEMS
5-3
C2
INVENTORY SYSTEMS
Perpetual systems Periodic systems
continually update accounting records
accounting records for relating to merchandise
merchandising transactions are
transactions updated only at the end
of the accounting period
5-4
P1 ACCOUNTING FOR MERCHANDISE
PURCHASES
5-5
P1
PURCHASE DISCOUNTS
A deduction from the invoice price granted to
induce early payment of the amount due.
5-6
P1
PURCHASE DISCOUNTS
2/10,n/30
Number of
Days Otherwise,
Discount Discount Is Net (or All) Credit
Percent Available Is Due in 30 Period
Days
5-7
P1 PURCHASE RETURNS AND
ALLOWANCES
Purchase Return . . .
Merchandise returned by the purchaser to
the supplier.
Purchase Allowance . . .
A reduction in the cost of defective
merchandise received by a purchaser from
a supplier.
5-8
P1 TRANSPORTATION COSTS AND
OWNERSHIP TRANSFER
5-9
P1
ACCOUNTING FOR MERCHANDISE
5 - 10
P2 ACCOUNTING FOR MERCHANDISE
SALES
5 - 11
P2
SALES OF MERCHANDISE
Each sales transaction for a seller of
merchandise involves two parts:
Revenue received in Recognition of the
the form of an asset cost of merchandise
from a customer sold to a customer
5 - 12
P2
SALES RETURNS AND ALLOWANCES
Sales returns and allowances usually involve
dissatisfied customers and the possibility of
lost future sales.
Sales returns refer Sales allowances
to merchandise that refer to reductions in
customers return to the selling price of
the seller after a merchandise sold to
sale. customers.
5 - 13
P2 MERCHANDISING COST FLOW IN
THE ACCOUNTING CYCLE
Beginning Net
inventory purchases
Period 1
Merchandise
available for sale
Ending Cost of
inventory goods sold To Income Statement
To Balance Sheet
Beginning Net
inventory purchases
Period 2
Merchandise
available for sale
Ending Cost of
inventory goods sold To Income Statement
To Balance Sheet
5 - 14
P3 CLOSING ENTRIES FOR
MERCHANDISERS
5 - 15
P4
A multiple-step
income
statement
format shows
detailed
computations
of net sales
and other
costs and
expenses, and
reports
subtotals for
various
classes of
items.
5 - 16
P4
SINGLE-STEP INCOME STATEMENT
5 - 17
P4
CLASSIFIED BALANCE SHEET
Highly
Liquid
Less
Liquid
5 - 18
END OF CHAPTER 5
