1. Unit 4: The Accounting Cycle for a Merchandising Corporation
Chapters 14-21
Accounting 2
Ms. Alltucker

2. Chapter 14: Accounting for Sales and Cash Receipts
Accounting II
Ms. Alltucker

3. Learning Objectives
Explain the difference between a service business and a merchandising business
Analyze transactions relating to the sale of merchandise
Explain the difference between a retailer and a wholesaler
Record a variety of sales and cash receipt transactions in a general journal
Define the accounting terms introduced in this chapter

4. Section 1: Accounting for a Merchandising Business
What you will learn:
The purpose of a merchandising business
The difference between a retailer and a wholesaler
Uses of merchandise inventory account and its rules of debit and credit
Uses of sales account and its rules of debit and credit
Why it’s important:
As consumers, we buy goods from merchandising businesses daily. You need to understand the nature of these transactions to maintain accounting records for a merchandising business.

5. Service vs. Merchandise
Service provides a service to the public for a fee
Merchandising buys goods and then sells those goods to customers for a profit
Operate as retailers or wholesalers or both
Retailers business that sells to the final user, consumer
Wholesaler business that sells to retailers

6. Operating Cycle of a Merchandising Business

7. Chart of Accounts Look on page 355 for the chart of accounts
What accounts are new to you?

8. Merchandising Inventory Account
Merchandise goods bought for resale
Inventory items of merchandise the business has in stock
Merchandise inventory—account name
Merchandise Inventory
Credit –
Decrease Side
Debit +
Increase Side
Normal Balance

9. Sales Account
When a retail merchandising business sells to a customer, the mount of the merchandise sold is recorded in the SALES account
Sales account
Revenue account
Sales
Debit –
Decrease Side
Credit +
Increase Side
Normal Balance

10. Thinking Critically
1. Explain the two types of merchandising businesses?
2. What type of account is Merchandise Inventory?