1. Student Version
Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely you will be able to recall information.
These PowerPoint slides have been modified from the lecture decks by making them fill-in-the-blank. Why? So that you get an opportunity to repeat a visual cue (from the lecture or the book) via completing text here.
In addition, most text book exhibits have been removed as they are available in your text directly.

2. Accounting for Merchandising Businesses
Chapter 6

3. Learning Objective 1
Distinguish between the activities and financial statements of service and merchandising businesses.

4. Nature of Merchandising Businesses
Service Business
________________ $XXX
________________ –XXX
________________ $XXX

5. Nature of Merchandising Businesses
___________ $XXX
___________ –XXX

6. Nature of Merchandising Businesses
When merchandise is sold, the revenue is reported as ___________ , and its ___________ is recognized as an expense called ______ __ _______________ _______ .

7. Nature of Merchandising Businesses
The cost of merchandise sold is subtracted from ___________ to arrive at ___________ . It is the profit before deducting ___________ ___________ .

8. Nature of Merchandising Businesses
Merchandise on hand (not _________ ) at the ___________ of an accounting period is called ___________ ___________ .

9. Nature of Merchandising Businesses

10. Learning Objective 2
Describe and illustrate the accounting for merchandise transactions.

11. ___________ Transactions
If merchandise inventory at the ___________ of the period is determined by taking a physical count of ___________ on ___________ , a ___________ ___________ system is being used.

12. ___________ Transactions
Under the ___________ inventory system, the amounts of ___________ purchased, ___________ for sale, and ___________ are continuously (___________ ) ___________ in the inventory records.

13. Credit Terms
To encourage the buyer to ___________ before the ___________ of the credit period, the ___________ may offer a ___________ . ___________ terms of 2/10, n/30 are summarized in Exhibit 2.

14. ___________ ___________
A buyer may receive a ___________ from the ___________ ( _____ ______ ) for ___________ payment of the amount owed. From the buyer’s perspective, such discounts are called ___________ ___________ .

15. Purchases Returns and ___________
A purchases ___________ involves actually ___________ ___________ that is ___________ or does not meet the ___________ of the order. From a buyer’s perspective, such ___________ are called ___________ ___________ and ___________ .

16. ___________ ___________
A debit ___________ , often called a ___________ memo, informs the ___________ of the amount the ___________ proposes to ___________ to the account payable due to the ___________ .

17. ___________ Discounts
The terms for when payments for merchandise are to be made are called ___________ ___________ . If payment is ___________ on delivery, the terms are ___________ or net ___________ . Otherwise, the buyer is allowed an amount of time, known as the ___________ ___________ , in which to pay.

18. Credit Memo
A ___________ ___________ , often called a ___________ ___________ , authorizes a credit to (___________ ) the ___________ accounts receivable. An example of a ___________ ___________ issued by NetSolutions is shown in Exhibit 4.

19. Freight
If ownership of the merchandise passes to the ___________ when the ___________ delivers the merchandise to the freight carrier, the terms are said to be ___________ (___________ ) ___________ ___________ .

20. ___________
If ownership of the merchandise passes to the ___________ when the ___________ receives the merchandise, the terms are said to be ___________ (___________ ) ___________ .

21. ___________ ___________
When ___________ offer special discounts to certain classes of ___________ who order ___________ quantities, these discounts are called ___________ ___________ .

22. Learning Objective 3
Describe and illustrate the financial statements of a merchandising business.

23. Multiple - step _________ Statement
The ___________ ___________ ___________ ___________ contains several sections, ___________ , and subtotals.

24. Revenue from ___________
Sales is the ___________ amount charged customers for ___________ sold, including ______ _________ and ___________ on account.

25. Revenue from Sales
_______ returns and _______________ are granted by the ___________ to ___________ for ___________ or defective merchandise.

26. Revenue from Sales
___________ discounts are granted by the ___________ to customers for ___________ payment of amounts ___________ .

27. Revenue from Sales
Net ___________ is determined by subtracting sales ___________ ___________ and ___________ and ___________ discounts from ___________ .

28. Cost of ___________ ________
The ______ of ________ sold is the ___________ of the ___________ sold to customers. ___________ costs consist of all the costs of ___________ the ___________ and readying it for ___________ , such as ___________ and freight ___________ .

29. ___________ from OPERATIONS
Selling expenses are incurred ___________ in the ___________ of ___________ .
________________

30. Income from Operations
____________ expenses sometimes called general _____________, are incurred in the _________ or general operations of the business.
________________

31. Multiple-Step ____________ Statement
_______ from operations, sometimes called __________ __________, is determined by subtracting __________ __________ from gross profit.

32. Other __________ and Expenses
Other _________is __________ from sources __________ than the primary __________ __________ of a business.
Other __________ is an __________ that __________ be traced directly to the __________ __________ of the business.

33. __________ - __________ Income Statement
An alternative form of income statement is the ______-______ __________ __________ . As shown Exhibits 9, 10 & 11, the income statement for NetSolutions deducts the __________ of all expenses in one step from the __________ of all __________ .

34. __________ __________
The form of __________ __________ with the assets on the __________ side and the __________ and __________ __________ on the __________ side is called the __________ form.

35. Balance Sheet
When the balance sheet is presented in a __________ sequence in __________ sections, it has been prepared using the __________ form. This is the form used in Exhibit 11.

36. Learning Objective 4
Describe the adjusting and closing process for a merchandising business.

37. __________ Entry for __________ Shrinkage
Merchandising businesses may experience some loss of __________ due to __________ , __________ theft, or errors in __________ or __________ inventory.

38. Adjusting Entry for __________ __________
If the balance of the Merchandise Inventory account is __________ than the __________ amount of the merchandise count, the difference is often called inventory __________ or __________ __________ .

39. Step 1: Closing Entries
__________ each __________ account with a credit balance, such as __________ , for its __________ and credit __________ __________ .

40. Step 2: Closing Entries
Credit each __________ account with a __________ balance, such as an expense , for its balance and debit __________ __________ .

41. Step 3: Closing Entries
Debit __________ __________ for the amount of its balance (__________ ) and __________ the owner’s __________ account.

42. Step 4: Closing Entries
__________ the __________ capital account for the balance of the __________ account and __________ the __________ account.

43. Learning Objective 5
Describe and illustrate the use of the ratio of net sales to assets in evaluating a company’s operating performance.

44. Ratio of ______ _______ to Assets
The ratio of _____ _______to _______ measures how __________ a business is using its __________ to generate __________ .
Ratio of Net Sales to Assets =

45. The Periodic Inventory System
Appendix
The Periodic Inventory System

46. Recording Merchandise Transactions
Purchases. __________ of inventory are recorded in a __________ account rather than in the __________ __________ account.

47. Recording Merchandise Transactions
__________ Discounts. __________ __________ are normally recorded in a separate __________ __________ account. The balance of the __________ discounts account is reported as a __________ from __________ for the period.

48. Recording Merchandise Transactions
__________ Returns __________ __________. __________ __________ and __________ are recorded in a similar manner as __________ discounts.

49. Recording Merchandise Transactions
Freight In. When merchandise is purchased __________ shipping point, the __________ pays for the __________ . Under the periodic inventory system, freight paid when purchasing merchandise __________ __________ __________ __________ is debited to __________ .

50. Accounting for Merchandising Businesses
The End