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Session 8 Merchandising Operations

Session 8 Merchandising Operations. Merchandising Operations. Basic Flow Purchase of Inventory Sales of Merchandise Inventory Systems Merchandising Transactions F/S Overview. Inventory Methods. Perpetual Revenue and COGS—on-going B + I - O = E Periodic

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Session 8 Merchandising Operations

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  1. Session 8Merchandising Operations FINANCIAL ACTG. - BUS 020 - SPRING 2015

  2. Merchandising Operations • Basic Flow • Purchase of Inventory • Sales of Merchandise • Inventory Systems • Merchandising Transactions • F/S Overview FINANCIAL ACTG. - BUS 020 - SPRING 2015

  3. Inventory Methods • Perpetual • Revenue and COGS—on-going • B + I - O = E • Periodic • Revenue only; count inventory; calculate COGS • B + I - E = O FINANCIAL ACTG. - BUS 020 - SPRING 2015

  4. Purchasing Transactions • Purchases • Freight and other misc. costs • Returns • Discounts FINANCIAL ACTG. - BUS 020 - SPRING 2015

  5. Sales Transactions • Shipment • Returns • Discounts Use contra accounts FINANCIAL ACTG. - BUS 020 - SPRING 2015

  6. Closing Entries • Temporary accounts • Zero them out • Revenue, expenses and dividends • Permanent accounts • Retained earnings is the final location for the temporary accounts FINANCIAL ACTG. - BUS 020 - SPRING 2015

  7. Merchandising Transactions • See Summary on p. 235-236 • Note: we do not use the Income Summary; we balance the closing entry directly into Retained Earnings FINANCIAL ACTG. - BUS 020 - SPRING 2015

  8. Financial Statement Overview • Multi-step Income Statement—p. 237 • Non-operating activities—p. 236 • Classified Balance Sheet—p. 238-239 • Statement of Shareholders’ Equity • Statement of Cash Flows FINANCIAL ACTG. - BUS 020 - SPRING 2015

  9. Financial Statement Preparation • Headings are IMPORTANT • Company, Title and Date • Note how the T-Account balances track to the actual financial statements FINANCIAL ACTG. - BUS 020 - SPRING 2015

  10. Expanded Income Statement Revenue - Cost of Goods Sold = Gross Margin - Operating expenses = Operating income +/- Other income and expense = Income before taxes - Income taxes = Net income FINANCIAL ACTG. - BUS 020 - SPRING 2015

  11. A Closer Look at the Balance Sheet • Current assets • Non-current assets • Current liabilities • Long-term debt • Shareholders’ equity • Contributed capital • Retained earnings • Dividends FINANCIAL ACTG. - BUS 020 - SPRING 2015

  12. Financial Statement Relationships Stmt of Sharehldrs Eq. Balance Sheet Income Statement Statement of Cash Flows Current Assets Non- current Assets Current Liabilities Long- term Debt Equity Revenue Cost of Goods Sold (COGS) Gross Margin Operating Exps. Net Income Operating Cash Investing Cash Financing Cash Change in Cash Beginning Cash Ending Cash Beginning S/E Net Income Less: Dividends Ending S/E FINANCIAL ACTG. - BUS 020 - SPRING 2015

  13. Let’s Do It! • See p. 242 • Create a Multi-step Income Statement • Create a Classified Balance Sheet • Create a Statement of Shareholder’s Equity FINANCIAL ACTG. - BUS 020 - SPRING 2015

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