Presentation Transcript

1. Chapter 11

   Accounting for a Merchandising Business
2. Accounting for Businesses 11.1
3. Supplies (we know this) Purchases appear on balance sheet Count what we have left at the end of period Make adjusting entry Take away from asset what has been used Expense what has been used 11.1
4. Merchandising Business Sell Products or Goods Need to keep track of products What we have in Stock (inventory) What has been Purchased What has been Sold Inventory products appear on balance sheet at price paid current asset 11.1
5. Sold Merchandise Use Periodic Inventory system Count what we have left at end of period Make adjustments for what is missing -SOLD Remove sold items from balance sheet Expense what has been sold Appears on Income Statement in Cost of Goods Sold section Decreases Net Income 11.1
6. Cost of Goods Sold Appears on the Income Statement Beginning Inventory plus purchases = Cost of Goods Available for sale Goods Available minus Ending Inventory = Cost of Goods Sold (COGS) Beginning Inventory Ending Inventory Cost of Goods Sold - Purchases + = 11.1
7. New Income Statement Revenue minus COGS Gross Profit Gross Profit minus Operating Expenses Net Income or Net Loss See text page 427 11.1
8. 11.1 Homework Page 428 (wb 326-328) Exercises 1-5 Review questions 1-15 Exercise 1 Help $250-$100 = $150 cost price 150/250 = cost is 60% of selling price 100/250 = profit is 40% of selling price 11.1
9. Inventory Accounts Merchandise Inventory (Asset) Shows inventory as of beginning of period Physical count done at end of period and adjustment made Appears on balance sheet and Income statement Purchases (Expense) Used to record when things are bought Adjusted at end of period to show what has not been sold and is an Asset 11.2
10. Freight in Shipping and delivery charges for merchandise arriving - coming in Added to the cost of goods sold Different than Delivery charges expense Cost to send products out to customers Beginning Inventory Ending Inventory Cost of Goods Sold - Purchases + Freight In + = 11.2
11. Merchandise and Purchases PST included in Price of purchase GST recoverable for amount of GST charged which business gets back Debit: Purchases Debit: GST Recoverable Credit: Accounts Payable or Bank 11.2
12. Merchandise and Sales Record GST and PST collected on sale of items Need to pay government Debit: Accounts Receivable or Bank Credit: Revenue Credit: GST Payable Credit: PST Payable 11.2
13. 11.2 Homework Page 433 (wb 328-330) Exercises 1-3 Review Questions 1-11 11.2
14. Merchandise and The Worksheet Not recorded in Adjustments column Three Steps Beginning Inventory Ending Inventory Purchases and Freight In 11.3
15. Merchandise and The Worksheet 1. Beginning Inventory from the trial balance aka Opening Balance extended to the Debit column of the Income Statement 11.3
16. Merchandise and The Worksheet 2. Ending Inventory Physical count aka New Balance Credit column of Income Statement AND Debit column of Balance Sheet 11.3
17. Merchandise and The Worksheet 3. Purchases and Freight in extended to Debit column of income statement with all other expenses 11.3
18. Page 435 11.3
19. Closing Entries RDebit Revenues and Merchandise Inventory (ENDING Inventory amount or new balance) Credit Income Summary EDebit Income Summary Credit Expenses, Freight In, Purchases and Merchandise Inventory (BEGINNING Inventory amount or opening balance) I and D are the same See page 439 11.3
20. Page 439 11.3
21. Merchandise Inventory Account Inventory 3000 3000 Remove Beginning Inventory during closing with Expense Beginning inventory Add New Ending Inventory during closing with revenue 5500 5500 New account balance 11.3
22. 11.3 Homework Page 440 Review Questions 1-14 Exercise 1 (A & D only) Exercise 2 (A, B, D only) HAND IN WORKBOOK PAGES 335 & 337 11.3
23. Returns and Allowances Accounts 2 New Contra Accounts Purchases Returns and Allowances Expense with credit balance Sales Returns and Allowances Revenue with debit balance Used instead of just reversing transactions Keep track of number of products returned Appear on Income Statement (pg 450) 11.4
24. Sales Sell Merchandise on account Dr. A/R Cr. Sales & Gst payable & Pst Payable If customer returns products issue Credit invoice Dr. Sales Returns & Gst payable & Pst Payable Cr. A/R See T-accounts on page 447 11.4
25. Purchases Purchased Merchandise on account Dr. Purchases & Gst Recoverable Cr. A/P If we return products we get a Credit invoice Dr. A/P Cr. Purchases Returns & Gst Recoverable See T-accounts on pg 448 11.4
26. Effect on Income Statement Purchases – Purchase Returns = Net Purchases BI + Net Purchases +FI –EI = CoGS Sales – Sales Returns = Net Sales Net Sales – CoGS = Gross Profit GP – Expenses = Net Income 11.4
27. 11.4 Homework Page 451 Exercises 1-5 Review questions 1-15 11.4
28. Terms of Sale Agreement as to when the good or services will be paid COD – Cash on Delivery Net 30 or Net 60 full amount due 30 or 60 days after the date of invoice 11.5
29. Terms of Sale 2/10, n30 amount due in 30 days BUT if you pay in 10 days you get a 2% discount 1/15, n60 amount due in 60 days BUT if you pay in 15 days you get a 1% discount 11.5
30. Discount Accounts 2 New Contra Accounts Discounts Allowed Revenue with debit balance Discounts Earned Expense with credit balance Used to keep track of amount of discounts Appear on Income Statement (pg 458) 11.5
31. Effect on Income Statement Purchases – Returns – Discounts Earned = Net Purchases BI + Net Purchases +FI –EI = CoGS Sales – Returns – Discounts Allowed = Net Sales Net Sales – CoGS = Gross Profit GP – Expenses = Net Income 11.4
32. Sales Sell Merchandise with terms 2/10,n30 Dr. A/R Cr. Sales & Gst payable & Pst Payable If customer pays within 10 days Dr. Bank & Discounts Allowed Cr. A/R Discounts Allowed Bank Revenue A/R 490 500 500 500 10 11.5
33. Purchases Purchased Merchandise with terms 1/15,n60 Dr. Purchases & Gst Recoverable Cr. A/P If we pay within 15 days Dr. A/P Cr. Bank & Discounts Earned Discounts Earned Bank Purchases A/P 990 1000 1000 1000 10 11.5
34. 11.5 Homework Page 459 Exercises 1-4 Review Questions 1-16 11.5
35. Perpetual Inventory Keep track of changes in inventory AS THEY OCCUR Different than Periodic; Only at the end of the Period Accounts: Cost of Goods Sold (expense) Merchandise Inventory (asset) No longer use PURCHASES 11.6
36. Transactions Periodic Make adjustment to Merchandise Inventory during CLOSING entries Perpetual Keep track of inventory changes after EVERY transaction Purchase Debit INVENTORY (Asset) Credit A/P or Bank Purchase Debit Purchases (Expense) Credit A/P or Bank Sale Debit Cash or A/R Credit Sales Sale Debit Cash or A/R Debit COST OF GOODS SOLD Credit INVENTORY Credit Sales 11.6
37. May 3rd: Purchase Invoice from Lau’s Sports 40 pairs of shoes @ $39.95/pair cost $1,598.00 plus $111.86 GST May 7th: Credit Invoice from Lau’s Sports Returned 5 defective pairs of shoes for full credit @ $39.95/pair May 12th: Cheque copy to Lau’s Sports Paid full amount owed less early payment discount 11.6
38. May 22nd: Cash Register Tape Sold 5 pairs of running shoes  retail price $74.95 per pair  cost was $39.95 per pair May 29th : Cash Register Tape Customer returned a pair of running shoes  retail price $74.95 per pair  cost was $39.95 per pair May 29th : Returned shoes were damaged, cannot be resold 11.6
39. 11.6 HOMEWORK Pgs 465-468 Exercises 1-4b Review Questions 1-11 11.6
40. Chapter 11 Review Homework Pages 480-483 Exercise 1 (no returns account) Exercise 2 (WITH returns account) Exercise 3 (true and false) Exercise 4 (NEW income statement) collecting Tomorrow for Feedback Exercise 5
41. Chapter 11 Review Homework Exercises 1-11 pages 480-485