1. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 1

2. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 2 Chapter 6 I.This Week A.pp. 223 – 233 and Appendix 6A B.Contrast periodic and perpetual C.Financial statement preparation and formulas II.Fall Break III.Week After Break A.pp. 233 – 249 B.Appendix 6B and Appredix 6C

3. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 3 Chapter 6 I.This Week A.Chap 5, pp. pp. 200-213 Chap 5, Appendix 5A Chap 6, pp. 228-233 B.Contrast periodic and perpetual C.Financial statement preparation and formulas II.Fall Break III.Week After Break A.Chap 6, pp. 233 – 247 B.Appendix 6A and Appendix 6B

4. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 4 Chapter 6 I.This Week A.Chap 5, pp. pp. 200-213 Chap 5, Appendix 5A Chap 6, pp. 228-233 B.Contrast periodic and perpetual C.Financial statement preparation and formulas II.Fall Break III.Week After Break A.Chap 6, pp. 233 – 247 B.Appendix 6A and Appendix 6B

5. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 5 Contrast Periodic and Perpetual

6. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 6 Merchandising periodic perpetual

7. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 7

8. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 8 Merchandising periodic perpetual Review New

9. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 9 What’s New?  new accounts  new look for transactions  new details on Income Statement

10. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 10 New Accounts Merchandise Inventory goods for resale co$t Purchases Purchase Returns and Allowances Purchase Discounts contra Freight-In “sub”

11. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 11 New Accounts Sales retail Sales Returns and Allowances Sales Discounts contra

12. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 12 New Accounts Cost of Goods Sold expense

13. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 13 New Transactions (buyer’s point of view) Purchased merchandise from Seller, Inc., FOB shipping point, 2/10,n/30, $1,000. Date Account Title RefDebitCredit Merchandise Inventory1,000 Accounts Payable Purchases

14. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 14 New Transactions (buyer’s point of view) Paid Mack Trucking Company for freight charges, $100. Date Account Title RefDebitCredit Merchandise Inventory100 Cash Freight- In

15. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 15 New Transactions (buyer’s point of view) Returned $200 of defective goods, receiving credit. Date Account Title RefDebitCredit Merchandise Inventory 200 Accounts Payable Purchases Returns and Allowances

16. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 16 New Transactions (buyer’s point of view) Paid the balance due within the discount period. Date Account Title RefDebitCredit Accounts Payable Merchandise Inventory 800 16 Cash 784 Purchase Discount

17. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 17 New Accounts Purchases Invoice 1,000 Freight-In 100 Pur Disc 16 Purchase Returns and Allowances 200

18. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 18 Sold merchandise (costing $60) to Buyer Co., FOB shipping point, 1/10,n/30, $100. New Transactions (seller’s point of view) Accounts Receivable100 Sales Date Account Title RefDebitCredit Periodic requires only one entry. Cost of Goods Sold Merchandise Inventory 60

19. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 19 Issued a credit memo to Buyer for goods returned, $20 ($12 cost). New Transactions (seller’s point of view) Sales Returns and Allow.20 Accounts Receivable Date Account Title RefDebitCredit Periodic only requires one entry. Merchandise Inventory Cost of Goods Sold 12

20. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 20 Summary of Periodic PURCHASES account is debited when goods are acquired. SALES is credited to record the sales price of the goods sold, but no entry is made to reduce inventory THEREFORE Must COMPUTE Cost of Goods Sold in order to find Net Income.

21. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 21 Financial Statement Formulas

22. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 22 Financial Statements Some Company Income Statement For the Year Ended 12/31/xx Sales $ xxx,xxx Cost of Goods Sold xx,xxx GROSS PROFIT $ x,xxx Sales ¹ - Cost of Goods Sold ² = Gross Profit

23. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 23 ¹ “Sales” means “net sales”

24. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 24 New Accounts Sales retail Sales Returns and Allowances Sales Discounts contra

25. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 25 Financial Statements Some Company Income Statement For the Year Ended 12/31/xx Sales $ xxx,xxx Less:SR&Ax,xxx S Disc xxx x,xxx Net Sales $ xxx,xxx Cost of Goods Sold xx,xxx GROSS PROFIT $ x,xxx

26. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 26 ² Cost of Goods Sold Beginning Inventory +Purchases ³ =Goods Available for Sale -Ending Inventory =Cost of Goods Sold It’s a formula… not an account!

27. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 27 “Purchases”

28. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 28 ³ “Purchases” means “net purchases”

29. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 29 New Accounts Purchases goods for resale co$t Purchase Returns and Allowances Purchase Discounts contra Freight-In

30. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 30 ³ “Purchases” means “Net Purchases” Gregg & Wilson Purchases +Freight-In -Pur Ret & Allow -Pur Discounts =Net Purchases Weygandt, Kieso, Kimmel Purchases -Pur Ret & Allow -Pur Discounts =Net Purchases +Freight-In = Cost of Goods Purchased

31. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 31 New Accounts Purchases goods for resale co$t Purchase Returns and Allowances Purchase Discounts contra Freight-In

32. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 32 ³ “Purchases” means “Net Purchases” Gregg & Wilson Purchases +Freight-In -Pur Ret & Allow -Pur Discounts =Net Purchases Weygandt, Kieso, Kimmel Purchases -Pur Ret & Allow -Pur Discounts =Net Purchases +Freight-In = Cost of Goods Purchased Go With This!

33. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 33 OUR Company

34. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 34 Beginning Inventory Purchases Goods Available For Sale Ending Inventory Cost of Goods Sold

35. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 35 Beginning Inventory Purchases Goods Available For Sale Ending Inventory Cost of Goods Sold

36. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 36 B I +P+P =GAFS -EI =COGS

37. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 37 B I +P+P =GAFS -EI =COGS

38. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 38 Beginning Inventory Purchases GAFS Ending Inventory COGS To Balance Sheet To Income Statement

39. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 39 Practice Exercise

40. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 40 Revision

41. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 41 Revision January 1 was…

42. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 42 Revision

43. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 43 Revision $30,000 $22,000

44. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 44 From the list of accounts in the handout, prepare an income statement through gross profit.

45. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 45 Where do we start? What’s the first thing you do when you prepare an Income Statement?

46. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 46

47. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 47

48. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 48

49. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 49

50. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 50

51. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 51 Beginning Inventory Purchases Goods Available For Sale Ending Inventory Cost of Goods Sold

52. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 52 B I +P =GAFS -EI =COGS

53. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 53

54. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 54

55. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 55

56. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 56

57. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 57 ³ “Purchases” means “Net Purchases” Gregg & Wilson Purchases +Freight-In -Pur Ret & Allow -Pur Discounts =Net Purchases Weygandt, Kieso, Kimmel Purchases -Pur Ret & Allow -Pur Discounts =Net Purchases +Freight-In = Cost of Goods Purchased Go With This!

58. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 58

59. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 59

60. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 60 B I +P =GAFS -EI =COGS

61. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 61

62. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 62

63. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 63

64. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 64 B I +P =GAFS -EI =COGS

65. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 65

66. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 66 Who learned something today?

67. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 67 Have a great day…

68. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 68 …a great week…

69. © Copyright 1999-2005 by M. Ray Gregg. All Rights Reserved. 69 … and a FABULOUS fall break!