1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 4-1 Responsibility Accounting for a Merchandising Business

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 2 LESSON 4-1 TERMS REVIEW fiscal period – length of time in which a business reports financial information responsibility accounting – assigning control of business revenues, costs, and expenses as a responsibility of a specific manager direct expense – expenses that are identifiable with and chargeable to a specific department indirect expense – expenses that are a part of overall business operation and not part of one specific department departmental margin = revenue - cost of mdse sold - direct expenses departmental margin statement - Reports departmental margin for a specific department page 91

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 3 LESSON 4-1 RECORDING A DIRECT EXPENSE page 90

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 4 LESSON 4-1 RECORDING AN INDIRECT EXPENSE page 90

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 4-2 Interim Departmental Statement of Gross Profit

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 4-2 TERMS REVIEW gross profit – Revenue from sales minus the cost of merchandise sold departmental statement of gross profit – statement showing gross profit for each department periodic inventory – physically counting, measuring, weighing, etc. merchandise on hand (weekly, monthly or yearly) perpetual inventory – continuous record of increases, decreases and balances on hand (usually done by point of sale scanners) gross profit method of estimating an inventory – estimating inventory by using the previous year’s percentage of gross profit on operations component percentage – percentage relationship between one financial statement item and the total that includes that item page 97

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 4-2 1.List beginning inventory. 2.Determine net purchases. 3.Calculate merchandise for sale. 4.Determine net sales. 5.Calculate estimated gross profit. 6.Calculate the estimated cost of merchandise sold. 7.Calculate estimated ending inventory. ESTIMATING ENDING MERCHANDISE INVENTORY page 94 1 2 3 7 6 5 4

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 4-2 INTERIM DEPARTMENTAL STATEMENT OF GROSS PROFIT page 95

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 4-2 1.The cost of merchandise sold percentage: 2.The gross profit margin percentage:.6076 or 60.8% = $42,186.47 $69,429.95.3924 or 39.2% = $27,243.48 $69,429.95 COST OF MERCHANDISE SOLD AND GROSS PROFIT PERCENTAGES page 96 1 2

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 4-3 Preparing a Work Sheet for a Departmentalized Business

11. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 11 LESSON 4-3 TERMS REVIEW schedule of accounts receivable schedule of accounts payable work sheet trial balance plant assets depreciation expense page 110

12. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 12 LESSON 4-3 PROVING THE ACCURACY OF POSTING TO SUBSIDIARY LEDGERS page 99

13. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 13 LESSON 4-3 pages 102-103 DEPARTMENTAL WORK SHEET

14. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 14 LESSON 4-3 DEPARTMENTAL WORK SHEET pages 102-103

15. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 15 LESSON 4-3 ADJUSTMENT INFORMATION page 104

16. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 16 LESSON 4-3 ADJUSTMENTS SHOWN ON WORK SHEET Percentage Total Sales on Account Estimated Uncollectible Accounts Expense × = $210,940.00× = $2,109.40 1% page 104

17. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 17 LESSON 4-3 2. Write department loss in Income Statement Debit column. 1. Write department loss in Departmental Margin Statement Credit column. DEPARTMENTAL AND COMPANY LOSS ON A WORK SHEET 5 page 109 1234 3. Record company loss in Income Statement Credit column. 4. Record company loss in Balance Sheet Debit column. 5. Add description.

18. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 4-4 Responsibility Statements for a Merchandising Business

19. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 19 LESSON 4-4 TERMS REVIEW responsibility statements income statement statement of stockholders’ equity capital stock retained earnings dividends balance sheet page 117

20. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 20 LESSON 4-4 1.Determine net sales for department. 2.Determine cost of merchandise sold for department. 3.Calculate gross profit. 4.Record direct expenses of the department. 5.Calculate the departmental margin. DEPARTMENTAL MARGIN STATEMENT—AUDIO page 111 3 5 4 2 1

21. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 21 LESSON 4-4 COMPONENT PERCENTAGES ON DEPARTMENTAL MARGIN STATEMENTS Net Sales Departmental Margin Component Percentage for Departmental Margin ÷ = $49,222.61÷ = 14.3% $344,476.46 Component Percentages 20X320X220X1 Departmental Margin 14.3%13.4%13.1% page 112

22. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 22 LESSON 4-4 DEPARTMENTAL MARGIN STATEMENT—VIDEO page 113 1.Determine net sales for department. 2.Determine cost of merchandise sold for department. 3.Calculate gross profit. 4.Record direct expenses of the department. 5.Calculate the departmental margin. 3 5 4 2 1

23. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 23 LESSON 4-4 INCOME STATEMENT WITH DEPARTMENTAL MARGIN 1 9 1.Prepare the heading. 2-6.Use information from the departmental margin statements. 7.Use information from the Income Statement columns of the work sheet. 8.Complete the income statement. 9.Calculate component percentages. page 114 7 8 2-6

24. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 24 LESSON 4-4 STATEMENT OF STOCKHOLDERS’ EQUITY page 115

25. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 25 LESSON 4-4 BALANCE SHEET page 116

26. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 26 LESSON 4-4 BALANCE SHEET page 116

27. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 4-5 End-of-Period Work for a Departmentalized Business

28. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 28 LESSON 4-5 TERMS REVIEW adjusting entries closing entries post-closing trial balance accounting cycle page 117

29. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 29 LESSON 4-5 2.Enter the adjusting entries without additional explanation. JOURNALIZING ADJUSTING ENTRIES FOR A DEPARTMENTALIZED BUSINESS page 118 1.Write Adjusting Entries in the Account Title column. 1 2

30. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 30 LESSON 4-5 JOURNALIZING CLOSING ENTRIES FOR A DEPARTMENTALIZED BUSINESS page 119 1 1.Write Closing Entries in Account Title column. 2.Record entry to close income statement accounts with credit balances. 3.Write (continued on general journal page 15) to show that the closing entries are continued. 2 3

31. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 31 LESSON 4-5 JOURNALIZING CLOSING ENTRIES FOR A DEPARTMENTALIZED BUSINESS page 120 4.Write Closing Entries (continued) in the Account Title column. 5.Record entry to close income statement accounts with debit balances. 6.Record entry to close Income Summary to Retained Earnings. 7.Record entry for Dividends. 4 5 6 7

32. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 32 LESSON 4-5 POST-CLOSING TRIAL BALANCE FOR A DEPARTMENTALIZED BUSINESS page 122

33. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 33 LESSON 4-5 2.Record entries in journals. SUMMARY OF ACCOUNTING CYCLE page 123 1 2 3 4 5 6 7 8 9 3.Post journal entries to the ledgers. 9.Prepare a post-closing trial balance. 8.Journalize and post adjusting and closing entries. 7.Prepare financial statements. 6.Prepare a trial balance on the work sheet. 5.Prepare schedules of accounts receivable and accounts payable from the subsidiary ledgers. 4.Prepare interim departmental statement of gross profit. 1.Verify source documents for accuracy.