10.1 & 10.2 Merchandising Business Review. $120,000 available goods to sell $25,000 not sold & on hand $95,000 sold during fiscal period EXAMPLE: Balance.

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Presentation transcript:

10.1 & 10.2 Merchandising Business Review

$120,000 available goods to sell $25,000 not sold & on hand $95,000 sold during fiscal period EXAMPLE: Balance sheet: current asset (Merchandise inventory) Physical count of inventory  accuracy  lost, theft, damaged, returns Income Statement  cost of goods sold (COGS)

10.3 – Worksheet for Merchandising Business Review Ex. 1 Bok Trading Company

As you already know, the figures for the financial statements are obtained from a completed work sheet. Therefore, you must learn to handle three new merchandising accounts on the work sheet. Merchandise Inventory Purchases Freight-in The value (at cost) of the merchandise on hand at the beginning of the fiscal period The total cost of all merchandise inventory purchased during the fiscal period The total transportation costs of bringing the goods into the business

Step 3: Ending inventory obtained by a physical inventory is entered in two columns: the Income Statement credit column and the Balance Sheet debit column Step 2: Both Purchases and freight-in are extended to the Income Statement debit column Step 1: Beginning inventory is extended to the Income Statement debit column

MERCHANDISE RETURNS & ALLOWANCES—Chapter 10.4

In the Books of the Vendor: 1.Sale of merchandise: (Cash Sales Slip or Sales Invoice) Bank or A/PDR Revenue (Sales)CR HST PayableCR

2.Credit Invoice: is issued by the vendor to adjust, correct, or cancel a charge to a customer’s account for defective goods, unsatisfactory goods that are kept by the customer, or for an error made on the sales invoice. Sales Returns and Allowances: is the contra revenue account used to keep track of good returned by the customer to the vendor on account. This account decreases Owner’s Equity and has a debit balance. Sales Return + AllowancesDR HST PayableDR A/RCR

Cash Refund: if cash is refunded to the buyer for returned goods, no credit invoice is issued; a refund is made in the form of cash or by issuing a cheque. Sales Return + AllowancesDR HST PayableDR BankCR

In the Books of the Purchaser: 1.Purchase of Merchandise: (Cheque Copy or Purchase Invoice) PurchasesDR HST RecoverableDR Bank or A/PCR

2.Credit Invoice: is received by the purchaser for defective or damaged merchandise. This invoice allows the purchaser to reduce the amount owing to the vendor on account. Purchase Returns & Allowances: is the contra account to purchases and is used to keep track of good returned by the purchaser to the supplier. This account increases Owner’s Equity and has a credit balance. A/PDR Purchases Return & AllowancesCR HST RecoverableCR

Exercises: Ex. 1 & 2 p (t), p (w) Ex. 2 p. 456 (t), p (w) Ex. 7 p. 460 (t), p. 374 (w)