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List the operating cycle for a merchandising business. Question 1 List the operating cycle for a merchandising business. Collect cash from accounts. Pay expenses. Sell goods for cash (skip to step 4). Sell goods on account. Purchase goods for resale Glencoe Accounting

List the operating cycle for a merchandising business. Question 1 List the operating cycle for a merchandising business. Step 1: Purchase goods for resale Step 2a: Sell goods for cash (skip to step 4). Step 2b: Sell goods on account. Step 3: Collect cash from accounts. Step 4: Pay expenses. Glencoe Accounting

$1,800.00 $18.00 $1,782.00 Credit Credit Debit Debit Question 2 A customer bought merchandise on February 1 totaling $1,800.00. As an incentive to get this customer to pay early, you offer terms of 1/20, n/30. The customer pays on February 15. Calculate the following: Total sale amount __________ Amount of discount __________ Net cash received __________ Now indicate whether you would debit or credit the following accounts. Accounts Receivable __________ Customer’s subsidiary account __________ Sales Discounts __________ Cash in Bank __________ $1,800.00 $18.00 $1,782.00 Credit Credit Debit Debit Glencoe Accounting

YOUR course WORKS Home work Group 1: Chapters; 1 – 2 – 11 – 12 – 13 and 14, Last day is 3/19/2017, for 50 Points each. [6 X 50 = 300 Points] Home work Group 2: Chapters; 15 – 18 – 20 – 22 – 23 – 25 and 29, Last day is 5/7/2017, for 50 Points each . [7 X 50 = 350 Points] EXAMS: # 1 Due 1/31, for 65 Points – MID TERM 3/23, for 90 Points – # 2 Due 4/12, for 65 Points – FINAL Due 5/8 , for 90 Points. [65 + 90 + 65 + 90 = 310 Points] Case Study: # 1 Due 1/31 – # 2 Due 2/14 - # 3 Due 3/2 – # 4 Due 3/27 - # 5 Due 4/10 – # 6 Due 4/26 – # 7 Due 5/4, for 5 Points each. [7 X 5 = 35 Points] Glencoe Accounting

Merchandising businesses follow an orderly process for purchasing merchandise, supplies, and equipment. The accounting department is responsible for making the cash payments for the business. Individual accounts payable transactions are posted to a subsidiary ledger. Glencoe Accounting Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Explain the procedures for processing a purchase on account. Describe the accounts used in the purchasing accounts. Analyze transactions relating to the purchase of merchandise. Record a variety of purchases and cash payments. Post to the accounts payable subsidiary ledger. Identify controls over cash. Glencoe Accounting Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Key Terms # 1 P - 11 To 18 purchase requisition purchase order Purchasing Items Needed by a Business Section 15.1 Key Terms # 1 P - 11 To 18 purchase requisition purchase order packing slip processing stamp purchases discount discount period Purchases account cost of merchandise Glencoe Accounting

The Purchasing Process Purchasing Items Needed by a Business Section 15.1 Requesting needed items The purchase of supplies, equipment, and merchandise is divided into four stages: Ordering from a supplier Verifying items received Processing the supplier’s invoice Glencoe Accounting

The Purchasing Process Purchasing Items Needed by a Business Section 15.1 1) Purchase Requisition See page 420 purchase requisition A written request that a specified item or items be ordered. Glencoe Accounting

The Purchasing Process Purchasing Items Needed by a Business Section 15.1 Contents of the Purchase Order Include: Quantity Description 2) purchase order A written offer to a supplier to buy specified items. Unit price Total cost Supplier’s name and address Date needed Shipping method (optional) Glencoe Accounting

The Purchasing Process Purchasing Items Needed by a Business Section 15.1 The buyer unpacks and checks the contents against the packing slip. Verifying Items 3) Received When a shipment arrives: The buyer reports discrepancies to the accounting department. packing slip A form that lists the items included in the shipment. Glencoe Accounting

The Purchasing Process Purchasing Items Needed by a Business Section 15.1 4) Processing the Supplier’s Invoice The supplier sends an invoice, or bill, to the buyer. The accounting department checks the invoice against the packing slip and purchase order. If there are no discrepancies, a processing stamp is placed on the invoice. processing stamp A stamp placed on a creditor’s invoice that outlines the steps to be followed in processing the invoice for payment. Glencoe Accounting

The Purchasing Process Purchasing Items Needed by a Business Section 15.1 Processing the Supplier’s Invoice See page 422 Glencoe Accounting

The Purchasing Process Purchasing Items Needed by a Business Section 15.1 Purchases Discount Two Types of Discounts: Discount Period purchases discount The buyer’s cash discount for early payment of an invoice on account. discount period The period of time within which an invoice must be paid if a discount is to be taken. Glencoe Accounting

The actual cost to the business of the merchandise sold to customers. The Purchases Account Purchasing Items Needed by a Business Section 15.1 Merchandise bought to sell to customers is recorded in the Purchases account, a temporary account that is classified as a cost of merchandise account. Purchases account The account used to record the cost of merchandise purchased during a period. cost of merchandise The actual cost to the business of the merchandise sold to customers. Glencoe Accounting

Key Terms # 2 P - 20 To 31 Accounts payable subsidiary ledger Analyzing and Recording Purchases on Account Section 15.2 Key Terms # 2 P - 20 To 31 Accounts payable subsidiary ledger Tickler file Due date Purchases return Purchases allowance Debit memorandum Glencoe Accounting

Purchases of Assets on Account Analyzing and Recording Purchases on Account Section 15.2 The most important thing a retail business purchases is merchandise to resell. Merchandise can be bought on a cash basis or on account. Glencoe Accounting

Purchases of Assets on Account Analyzing and Recording Purchases on Account Section 15.2 The Accounts Payable Subsidiary Ledger Form See page 424 accounts payable subsidiary ledger A separate ledger that contains accounts for all creditors; it is summarized in the Accounts Payable controlling account in the general ledger. Glencoe Accounting

Purchases of Assets on Account Analyzing and Recording Purchases on Account Section 15.2 When a purchase of merchandise on account is recorded, a diagonal line is entered in the Posting Reference column to indicate the credit amount is posted in two places: The Accounts Payable controlling account The individual account in the accounts payable subsidiary ledger Glencoe Accounting

Purchases of Assets on Account Analyzing and Recording Purchases on Account Section 15.2 After an invoice is journalized, it is put in a Tickler file according to its Due date. Tickler file A file that contains a folder for each day of the month into which invoices are placed according to their due dates. Due date The date by which an invoice must be paid. Glencoe Accounting

Purchases of Assets on Account Analyzing and Recording Purchases on Account Section 15.2 Business Transaction On December 14 The Starting Line purchased $2,300 in merchandise on account from Pro Runner Warehouse, Invoice 7894. See pages 425–426 Glencoe Accounting

Purchases of Assets on Account Analyzing and Recording Purchases on Account Section 15.2 Business Transaction On December 15 The Starting Line received Invoice 3417, dated December 13, from Champion Store Supply for store equipment bought on account for $1,200, terms n/30. See pages 426–427 Glencoe Accounting

Purchases Returns and Allowances Analyzing and Recording Purchases on Account Section 15.2 Purchases Return Occasionally, a business buys merchandise that, upon inspection, is unacceptable. purchases return The return of merchandise bought on account to the supplier for full credit. Glencoe Accounting

Purchases Returns and Allowances Analyzing and Recording Purchases on Account Section 15.2 Purchases Return Occasionally, a business buys merchandise that, upon inspection, is unacceptable. Purchases Allowance purchases allowance A price reduction given when a business keeps unsatisfactory merchandise it has bought. Glencoe Accounting

Purchases Returns and Allowances Analyzing and Recording Purchases on Account Section 15.2 Purchases Return Occasionally, a business buys merchandise that, upon inspection, is unacceptable. Purchases Allowance Debit Memorandum debit memorandum The form a business uses to notify its suppliers (creditors) of a return or to request an allowance. Glencoe Accounting

Purchases Returns and Allowances Analyzing and Recording Purchases on Account Section 15.2 See page 427 Glencoe Accounting

Purchases Returns and Allowances Analyzing and Recording Purchases on Account Section 15.2 Business Transaction On December 16 The Starting Line issued Debit Memorandum 51 for the return of $200 in merchandise purchased on account from FastLane Athletics. See page 428 Glencoe Accounting

Purchases Returns and Allowances Analyzing and Recording Purchases on Account Section 15.2 Posting to General Ledger Accounts Payable Subsidiary Ledger See page 429 Glencoe Accounting

Key Terms # 3 P - 33 To 39 premium FOB destination FOB shipping point Analyzing and Recording Cash Payments Section 15.3 Key Terms # 3 P - 33 To 39 premium FOB destination FOB shipping point bankcard fee Glencoe Accounting

Controls over Cash How Businesses Can Manage Cash Payments Analyzing and Recording Cash Payments Section 15.3 How Businesses Can Manage Cash Payments Require proper authorization of all cash payments. Write checks for all payments. Use prenumbered checks. Retain and account for voided checks. Glencoe Accounting

Cash Payment Transactions Analyzing and Recording Cash Payments Section 15.3 An insurance premium is paid at the beginning of the covered period and is recorded in the Prepaid Insurance asset account. premium The amount paid for insurance. Glencoe Accounting

Cash Payment Transactions Analyzing and Recording Cash Payments Section 15.3 Business Transaction On December 19 The Starting Line purchased merchandise from FastLane Athletics for $1,300, Check 1002. See page 433 Glencoe Accounting

Cash Payment Transactions Analyzing and Recording Cash Payments Section 15.3 Recording Cash Payments for Items Purchased on Account See page 433 Glencoe Accounting

Cash Payment Transactions Analyzing and Recording Cash Payments Section 15.3 FOB destination Shipping terms are stated as FOB shipping point FOB destination Shipping term specifying that the supplier pays the shipping cost to the buyer’s destination. FOB shipping point Shipping term specifying that the buyer pays the shipping charge from the supplier’s shipping point. Glencoe Accounting

Cash Payment Transactions Analyzing and Recording Cash Payments Section 15.3 Business Transaction On December 24, The Starting Line issued Check 1004 for $275 to Dara’s Delivery Service for shipping charges on merchandise purchased from Sports Link Footwear. See page 435 Glencoe Accounting

Cash Payment Transactions Analyzing and Recording Cash Payments Section 15.3 Banks charge a bankcard fee for handling bankcard sales slips. Business Transaction On December 31 The Starting Line records the bankcard fee of $75, December bank statement. bankcard fee A fee charged for handling bankcard sales slips; usually based on the total amounts recorded on the sales slips processed. See page 435 Glencoe Accounting

1. Requesting needed items Question 1 From the four choices below, select the form that is related to each step in the purchasing process. purchase order packing slip processing stamp purchase requisition 1. Requesting needed items 2. Ordering from the supplier ___________________ 3. Verifying items received ___________________ 4. Processing supplier’s invoice ___________________ Glencoe Accounting

Question 2 If you ordered merchandise from a vendor in New York City and the terms stated “FOB Chicago” and your company is in Denver, what would that mean? Glencoe Accounting

Question 3 Your business received an invoice dated February 5 totaling $2,900.00. The vendor has offered the terms of 2/10, n/30. You pay on February 15. Calculate the following: total amount of purchase __________ amount of discount __________ amount of check __________ Now indicate whether you would debit or credit the following accounts. Accounts Payable __________ Vendor’s subsidiary account __________ Purchases Discounts __________ Cash in Bank __________ Glencoe Accounting

Thank you and See You On Friday at the Same Time, Take Care Glencoe Accounting