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LESSON 4-1

LESSON 4-1. Responsibility Accounting for a Merchandising Business. TERMS REVIEW. page 91. fiscal period – length of time in which a business reports financial information

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LESSON 4-1

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  1. LESSON 4-1 Responsibility Accounting for a Merchandising Business

  2. TERMS REVIEW page 91 • 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 LESSON 4-1

  3. RECORDING A DIRECT EXPENSE page 90 LESSON 4-1

  4. RECORDING AN INDIRECT EXPENSE page 90 LESSON 4-1

  5. LESSON 4-2 Interim Departmental Statement of Gross Profit

  6. TERMS REVIEW page 97 • 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 LESSON 4-2

  7. 1 2 3 4 5 6 7 ESTIMATING ENDING MERCHANDISE INVENTORY page 94 1. List beginning inventory. 5. Calculate estimated gross profit. 2. Determine net purchases. 6. Calculate the estimated cost of merchandise sold. 3. Calculate merchandise for sale. 7. Calculate estimated ending inventory. 4. Determine net sales. LESSON 4-2

  8. INTERIM DEPARTMENTAL STATEMENT OF GROSS PROFIT page 95 LESSON 4-2

  9. $42,186.47 $69,429.95 = .6076 or 60.8% $27,243.48 $69,429.95 .3924 or 39.2% = COST OF MERCHANDISE SOLD AND GROSS PROFIT PERCENTAGES page 96 1. The cost of merchandise sold percentage: 1 2 2. The gross profit margin percentage: LESSON 4-2

  10. LESSON 4-3 Preparing a Work Sheet for a Departmentalized Business

  11. TERMS REVIEW page 110 • schedule of accounts receivable • schedule of accounts payable • work sheet • trial balance • plant assets • depreciation expense LESSON 4-3

  12. PROVING THE ACCURACY OF POSTING TO SUBSIDIARY LEDGERS page 99 LESSON 4-3

  13. DEPARTMENTAL WORK SHEET pages 102-103 LESSON 4-3

  14. DEPARTMENTAL WORK SHEET pages 102-103 LESSON 4-3

  15. ADJUSTMENT INFORMATION page 104 LESSON 4-3

  16. Total Saleson Account Percentage Estimated Uncollectible Accounts Expense × = $210,940.00 × 1% = $2,109.40 ADJUSTMENTS SHOWN ON WORK SHEET page 104 LESSON 4-3

  17. 1 2 3 4 DEPARTMENTAL AND COMPANY LOSS ON A WORK SHEET page 109 5 1. Write department loss in Departmental Margin Statement Credit column. 2. Write department loss in Income Statement Debit column. 3. Record company loss in Income Statement Credit column. 4. Record company loss in Balance Sheet Debit column. 5. Add description. LESSON 4-3

  18. LESSON 4-4 Responsibility Statements for a Merchandising Business

  19. TERMS REVIEW page 117 • responsibility statements • income statement • statement of stockholders’ equity • capital stock • retained earnings • dividends • balance sheet LESSON 4-4

  20. 1 2 4 DEPARTMENTAL MARGIN STATEMENT—AUDIO page 111 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. 3 5. Calculate the departmental margin. 5 LESSON 4-4

  21. Departmental Margin Net Sales Component Percentage for Departmental Margin ÷ = $49,222.61 ÷ $344,476.46 = 14.3% Departmental Margin 14.3% 13.4% 13.1% COMPONENT PERCENTAGES ON DEPARTMENTAL MARGIN STATEMENTS page 112 Component Percentages 20X3 20X2 20X1 LESSON 4-4

  22. 1 2 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. 3 5. Calculate the departmental margin. 5 LESSON 4-4

  23. 2-6 7 8 INCOME STATEMENT WITH DEPARTMENTAL MARGIN page 114 1. Prepare the heading. 1 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. 9 LESSON 4-4

  24. STATEMENT OF STOCKHOLDERS’ EQUITY page 115 LESSON 4-4

  25. BALANCE SHEET page 116 LESSON 4-4

  26. BALANCE SHEET page 116 LESSON 4-4

  27. LESSON 4-5 End-of-Period Work for a Departmentalized Business

  28. TERMS REVIEW page 117 • adjusting entries • closing entries • post-closing trial balance • accounting cycle LESSON 4-5

  29. 2 JOURNALIZING ADJUSTING ENTRIES FOR A DEPARTMENTALIZED BUSINESS page 118 1. Write Adjusting Entries in the Account Title column. 1 2. Enter the adjusting entries without additional explanation. LESSON 4-5

  30. 2 JOURNALIZING CLOSING ENTRIES FOR A DEPARTMENTALIZED BUSINESS page 119 1 3 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. LESSON 4-5

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

  32. POST-CLOSING TRIAL BALANCE FOR A DEPARTMENTALIZED BUSINESS page 122 LESSON 4-5

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

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