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Unit 4: The Accounting Cycle for a Merchandising Corporation

Unit 4: The Accounting Cycle for a Merchandising Corporation. Chapters 14-21 Accounting 2 Ms. Alltucker. Chapter 14: Accounting for Sales and Cash Receipts. Accounting II Ms. Alltucker. Learning Objectives. Explain the difference between a service business and a merchandising business

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Unit 4: The Accounting Cycle for a Merchandising Corporation

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  1. Unit 4: The Accounting Cycle for a Merchandising Corporation Chapters 14-21 Accounting 2 Ms. Alltucker

  2. Chapter 14: Accounting for Sales and Cash Receipts Accounting II Ms. Alltucker

  3. Learning Objectives • Explain the difference between a service business and a merchandising business • Analyze transactions relating to the sale of merchandise • Explain the difference between a retailer and a wholesaler • Record a variety of sales and cash receipt transactions in a general journal • Define the accounting terms introduced in this chapter

  4. Section 1: Accounting for a Merchandising Business • What you will learn: • The purpose of a merchandising business • The difference between a retailer and a wholesaler • Uses of merchandise inventory account and its rules of debit and credit • Uses of sales account and its rules of debit and credit • Why it’s important: • As consumers, we buy goods from merchandising businesses daily. You need to understand the nature of these transactions to maintain accounting records for a merchandising business.

  5. Service vs. Merchandise • Service provides a service to the public for a fee • Merchandising buys goods and then sells those goods to customers for a profit • Operate as retailers or wholesalers or both • Retailers business that sells to the final user, consumer • Wholesaler business that sells to retailers

  6. Operating Cycle of a Merchandising Business

  7. Chart of Accounts • Look on page 355 for the chart of accounts • What accounts are new to you?

  8. Merchandising Inventory Account • Merchandise goods bought for resale • Inventory items of merchandise the business has in stock • Merchandise inventory—account name Merchandise Inventory Debit + Increase Side Normal Balance Credit – Decrease Side

  9. Sales Account • When a retail merchandising business sells to a customer, the mount of the merchandise sold is recorded in the SALES account • Sales account • Revenue account Sales Credit + Increase Side Normal Balance Debit – Decrease Side

  10. Thinking Critically • 1. Explain the two types of merchandising businesses? • 2. What type of account is Merchandise Inventory?

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