1. NETA POWERPOINT PRESENTATIONS TO ACCOMPANY VOLUME 1 Accounting Second Canadian Edition BY WARREN/REEVE/DUCHAC/ELWORTHY/KRISTJANSON/TOBER Adapted by Sheila Elworthy and Tana Kristjanson Copyright © 2014 by Nelson Education Ltd.1

2. CHAPTER 5 APPENDIX 1 The Periodic Inventory System Copyright © 2014 by Nelson Education Ltd.2

3. Not all merchandise businesses use the perpetual inventory system. For example, a small merchandise business may use a manual accounting system, making a perpetual inventory system too costly to maintain. In this case, the periodic inventory system may be used. Copyright © 2014 by Nelson Education Ltd.3

4. In the periodic inventory system, sales are recorded in the same manner as in the perpetual inventory system. However, cost of goods sold is not recorded on the date of sale. Instead, cost of goods sold is determined as shown in Exhibit 15. Copyright © 2014 by Nelson Education Ltd.4

5. 5

6. 6

7. Using the periodic inventory system, purchases of inventory are not recorded in the inventory account. Instead, purchases, purchases discounts, and purchases returns and allowances, and freight-in accounts are used. Copyright © 2014 by Nelson Education Ltd.7

8. Under the periodic inventory system of accounting, the inventory at the end of the period is determined by taking a physical count of inventory on hand. The inventory at the end of the period is subtracted from the goods available for sale to determine the cost of goods sold. Copyright © 2014 by Nelson Education Ltd.8

9. 9

10. 10

11. Exhibit 17 (cont.) Copyright © 2014 by Nelson Education Ltd.11

12. Exhibit 18 Copyright © 2014 by Nelson Education Ltd.12 Multi-Step Income Statement under the Periodic Inventory System

13. Exhibit 18 (cont.) Copyright © 2014 by Nelson Education Ltd.13 Multi-Step Income Statement under the Periodic Inventory System

14. Closing Entries for NetSolutions Debit each temporary account with a credit balance and credit Income Summary. In addition, Inventory is debited for its end-of-period balance based on the end-of-period physical inventory. Copyright © 2014 by Nelson Education Ltd.14

15. Copyright © 2014 by Nelson Education Ltd.15

16. Closing Entries for NetSolutions Credit each temporary account with a debit balance and debit Income Summary. In addition, Inventory is credited for its balance as of the beginning of the period. Copyright © 2014 by Nelson Education Ltd.16

17. Copyright © 2014 by Nelson Education Ltd.17

18. Closing Entries for NetSolutions Debit Income Summary for the amount of its balance (Net income) and credit the owner’s capital accounts. Debit the owner’s capital account for the balance of the withdrawals account. Copyright © 2014 by Nelson Education Ltd.18

19. Copyright © 2014 by Nelson Education Ltd.19

20. The End Copyright © 2014 by Nelson Education Ltd.20