1. 1 Chapter 8 Adjustments for Merchandizing Business: 商业企业会计调整

2. 2 The Accounting Cycle Journalize transactions. Post entries to the ledger accounts. Prepare trial balance. Make end-of- year adjustments. Prepare adjusted trial balance. Prepare financial statements. Prepare after closing trial balance. Journalize and post closing entries.

3. 3 An adjusting entry is recorded to bring an asset or liability account balance to its proper amount. Adjusting Accounts Prepaid insurance Prepaid insurance adjustment Unearned revenue Unearned revenue Depreciation Supplies Merchandize Inventory Merchandize Inventory

4. 4 Periodic inventory method 定期盘存制 Expense Account Merchandize inventory Adjusting (ending inventory) adjusting Adjusting (ending inventory) Purchase amount in This period

5. 5 Adjustment for merchandize inventory A merchandizing business must make adjustment for inventory account when using periodic method to record the inventory.

6. 6 Computing Cost of Goods Sold in Periodic Inventory System The accounting records of Party Supply show the following: Inventory, Jan. 1, 2003 $ 14,000 Purchases (during 2003) 130,000 The accounting records of Party Supply show the following: Inventory, Jan. 1, 2003 $ 14,000 Purchases (during 2003) 130,000 At December 31, 2003, Party Supply counted the merchandise on hand at $12,000. Calculate Party Supply’s cost of goods sold for 2003.

7. 7 Computing Cost of Goods Sold in Periodic Inventory System Cost of Goods Sold can be calculated as follows:

8. 8 Periodic inventory method 定期盘存制 Cost of Good Sold 12/31 12000 12/ 31 14000 Merchandise inventory 12/ 31 14000 1/1 14000 12/ 31 12000 adjusting closing Purchases 1/1----12/ 31 130000 12/ 31 130000 adjusting

9. 9 Periodic inventory method 定期盘存制 Income Summary 12/31 12000 12/ 31 14000 Merchandise inventory 12/ 31 14000 1/1 14000 12/ 31 12000 adjusting closing Purchases 1/1----12/ 31 130000 12/ 31 130000 adjusting

10. 10 Periodic inventory method 定期盘存制 Income Summary Merchandise inventory Adjusting (beginning inventory) Beginning balance Adjusting (ending inventory) adjusting Adjusting (ending inventory) Purchases Adjusting (beginning inventory) Purchase amount in This period purchase (Inventory bought in this period) closing Step 1 Step 2

11. 11 Creating Cost of Goods Sold in Periodic Inventory System adjust beginning balance of inventory to income summary

12. 12 Creating Cost of Goods Sold in Periodic Inventory System Now, Party Supply must record the ending inventory amount.

13. 13 An item is “material” if knowledge of the item might reasonably influence the decisions of users of financial statements. Supplies Lightbulbs The Materiality Principle ( 重要性原则）

14. 14 Adjusting Supplies On December 1, 2001, Scott Company paid $1,500 yuan worth of supplies for cash,

15. 15 Adjusting Supplies On December 31, 2001, Scott Company take a physical count of the supplies and found that there were 500 yuan worth of supplies left. The adjusting journal entry ($1000) needed on December 31, 2001 is shown below.

16. 16 Adjusting Supplies After posting, the accounts involved look like this: Office supplies Office Supplies expense 12/1 $15,00 12/31 $1,000

17. 17 Prior PeriodsCurrent PeriodFuture Periods Transaction Collected from customers in advance (creates a liability). Transaction Collected from customers in advance (creates a liability). End of Current Period Adjusting Entry  Recognize portion earned as revenue, and  Reduce balance of liability account. Adjusting Entry  Recognize portion earned as revenue, and  Reduce balance of liability account. Converting Liabilities to Revenue -- Adjustment for Unearned Revenue

18. 18 Buy your season tickets for all home basketball games NOW! “Go Big Blue” Adjusting Unearned Revenue (liability) Cash received in advance for providing products or services. Unearned revenue (liability) Revenue Unadjusted Balance Credit Adjustment Debit Adjustment

19. 19 The Accounting Cycle Journalize transactions. Post entries to the ledger accounts. Prepare trial balance. Make end-of- year adjustments. Prepare adjusted trial balance. Prepare financial statements. Prepare after closing trial balance. Journalize and post closing entries.

20. 20 Assignment Problem 3 on page 207

21. 21 End of Chapter 8 8