acc. for merch. bus-rev [compatibility mode]

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Accounting for Accounting for Merchandising BusinessesMerchandising Businesses

Service Business

Fees earned $XXXOperating expenses –XXXNet income $XXX

Nature of BusinessesNature of Businesses

Merchandising Business

Sales $XXXCost of Merchandise Sold –XXXGross Profit $XXXOperating Expenses –XXXNet Income $XXX

Nature of BusinessesNature of Businesses

Multiple-Step Income

Statement

Revenue from sales:Sales $720,185Less:Sales returns and allowances $ 6,140

Sales discounts 5,790 11,930Net sales $708,255

Cost of merchandise sold 525,305Gross profit $182,950

NetSolutionsIncome Statement For the Year Ended

December 31, 2007

ContinuedContinued

Operating expenses:Selling expenses:

Sales salaries expense $56,230Advertising expense 10,860Depr. Expense–store equipment 3,100Miscellaneous selling expense 630

Total selling expenses $ 70,820Administrative expenses:

Office salaries expense $21,020Rent expense 8,100Depr. expense–office equipment 2,490Insurance expense 1,910Office supplies expense 610Misc. administrative expense 760

Total admin. expenses 34,890Total operating expenses 105,710

Income from operations $ 77,240

ContinuedContinued

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Other income and expenses:Rent revenue $ 600Interest expense (2,440 ) (1,840)

Net income $75,400

ConcludedConcluded

MetodeMetode AkuntansiAkuntansi PeriodikPeriodik vs. vs. PerpetualPerpetual

Metode Periodik

• Suatu metode untuk menentukan harga pokok barang yang dijual dan nilai persediaan barang dagangan.

• Dalam metode ini, catatan persediaan tidak menunjukkan nilai barang dagangan yang tersedia untuk dijual dan nilai barang dagangan yang terjual selama periode tersebut.

• Dalam metode ini, setiap pembelian dan penjualan barang dagangan dicatat dalam akun Persediaan dan akun Harga Pokok Penjualan.

• Nilai barang dagangan tersedia untuk dijual dan nilai barang dagangan yang dijual secara kontinu disajikan di catatan persediaan.

MetodeMetode AkuntansiAkuntansi PeriodikPeriodik vs. vs. PerpetualPerpetual

Metode Perpetual

Cost of Merchandise PurchasedCost of Merchandise Purchased

Purchases $521,980

Less: Purchase returns and allowances $9,100

Purchase discounts 2,525 11,625

Net purchases $510,355

Add transportation-in 17,400

Cost of merchandise purchased $527,755

Cost of Merchandise SoldCost of Merchandise SoldMerchandise inventory, 1/1/07 $ 59,700Purchases $521,980Less: Purchase returns and

allowances $9,100Purchase discounts 2,525 11,625

Net purchases $510,355Add transportation-in 17,400

Cost of merchandise purchased 527,755Merchandise available for sale $587,455Less merchandise inventory, 12/31/07 62,150Cost of merchandise sold $525,305

Single-Step Income Statement for a Merchandising

Business

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Revenues:Net sales $708,255Rent revenue 600

Total revenues $708,855Expenses:

Cost of merchandise sold $525,305Selling expenses 70,820Administrative expenses 34,890Interest expense 2,440

Total expenses 633,455Net income $ 75,400

NetSolutionsIncome Statement

For the Year Ended December 31, 2007

Statement of Owner’s Equity for

a Merchandising Business

Chris Clark, capital, 1/1/07 $153,800Net income for year $75,400Less withdrawals 18,000Increase in owner’s equity 57,400Chris Clark, capital, 12/31/07 $211,200

NetSolutionsStatement of Owner’s Equity

For the Year Ended December 31, 2007

Balance Sheet

AssetsCurrent assets:

Cash $52,950Accounts receivable 91,080Merchandise inventory 62,150Office supplies 480Prepaid insurance 2,650

Total current assets $209,310

NetSolutionsBalance Sheet

December 31, 2007

ContinuedContinued

Property, plant, and equipment: Land $20,000Store equipment $27,100

Less accumulateddepreciation 5,700 21,400

Office equipment $15,570Less accumulated

depreciation 4,720 10,850Total property, plant, andequipment 52,250

Total assets $261,560

ContinuedContinued

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LiabilitiesCurrent liabilities:

Accounts payable $22,420Note payable (current portion) 5,000Salaries payable 1,140Unearned rent 1,800

Total current liabilities $ 30,360Long-term liabilities:

Note payable (due 2017) 20,000Total liabilities $ 50,360

Owner’s EquityChris Clark, capital 211,200Total liabilities and owner’s equity $261,560

ConcludedConcluded

Sales TransactionsSales Transactions

JOURNAL

Date DescriptionPost.

Ref. Dr Cr.

1

2

3

4

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Jan. 3 Cash 1 800 002007

Sales 1 800 00

To record cash sales.

On January 3, a firm sold $1,800 On January 3, a firm sold $1,800 of merchandise for cash.of merchandise for cash.

Cash SalesCash Sales Cash SalesCash Sales

Using a perpetual inventory, the inventory Using a perpetual inventory, the inventory cost of $1,200 must be recorded.cost of $1,200 must be recorded.

6

7

8

9

3 Cost of Merchandise Sold 1 200 00

Merchandise Inventory 1 200 00

To record the cost ofmerchandise sold.

10

Credit card sales (MasterCard or Credit card sales (MasterCard or Visa) are recorded as cash sales.Visa) are recorded as cash sales.At the end of the month, $48 was At the end of the month, $48 was sent to cover this service charge.sent to cover this service charge.

JOURNAL


Ref. Dr Cr.

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Cash 48 00

Jan. 31 Credit Card Expense 48 002007

Cash SalesCash Sales

To record service chargeson credit card sales for themonth.

Jan. 12 Accounts Receivable—Sims Co. 510 00

Invoice No. 7172.

Sales 510 00

12 Cost of Merchandise Sold 280 00Merchandise Inventory 280 00

Cost of merchandise sold on Invoice No. 7172.

Sales on AccountSales on Account

On January 12, a firm sold Sims Company On January 12, a firm sold Sims Company merchandise on account, $510. The cost of merchandise on account, $510. The cost of

the merchandise to the seller was $280.the merchandise to the seller was $280.

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Sales DiscountsSales Discounts

The terms for when payments for merchandise are to be made are

called credit terms.

If buyer is allowed an amount of time to pay, it is known as the credit period.

If invoice is paid within 10 days of

invoice date


Credit Terms

Invoice for $1,500Terms:

2/10, n/30

$1,470 paid (less 2% as a cash

discount)

If invoice isNOT paid within 10 days of

invoice date


Credit Terms

Invoice for $1,500Terms:

2/10, n/30

$1,500 PAID


On January 21, the firm receives the On January 21, the firm receives the amount due from Sims (refer to Slide amount due from Sims (refer to Slide

25), less the 2 percent discount.25), less the 2 percent discount.

Jan. 21 Cash 499 80

Accounts Receivable—Sims Co. 510 00

Sales Discounts 10 20

Collection of Invoice

No. 7172, less discount.

Sales Returns and AllowancesSales Returns and Allowances

Merchandise that is returned to the vendor is referred to as a sales return.

If there is a defect in the product or the wrong item was shipped, the seller

may reduce the initial price at which the goods were sold. This is known as

a sales allowance.

Jan. 13 Sales Returns and Allowances 225 00

Credit Memo No. 32.

Accounts Receivable—Krier Co. 225 00

13 Merchandise Inventory 140 00Cost of Merchandise Sold 140 00

Cost of merchandise returned—Credit Memo 32.

Sales Returns and AllowancesSales Returns and Allowances

On January 13, issued Credit Memo 32 to On January 13, issued Credit Memo 32 to KrierKrierCompany for merchandise returned to Company for merchandise returned to NetSolutionsNetSolutions. .

Selling price, $225; cost to Selling price, $225; cost to NetSolutionsNetSolutions, $140., $140.

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Purchase Purchase TransactionsTransactions Date Description

Post.

Ref. Dr Cr.

1

2

3

4

5

Jan. 3 Merchandise Inventory 2 510 002007

Cash 2 510 00

Purchased inventory from

Bowen Co.

Purchase Transactions

On January 13, Purchased merchandise On January 13, Purchased merchandise for cash from Alden Company, $2,510.for cash from Alden Company, $2,510.

What’s the last day the invoice can be paid?

Purchase DiscountsPurchase Discounts

Alpha Technologies issues an invoice for

$3,000 to NetSolutions dated

March 12, with terms 2/10, n/30.

Invoice period 30Days in March 31Date of invoice 12Remaining days 19April 11

Let’s do a simple calculation.

The full amount is due on April 11.


We can borrow at an annual interest rate of 6%. Should we borrow the to pay the invoice within the discount period?


$60 discount (2% x

$3,000)?

Discount $60.00Interest for 20 days

at the rate of 6%on $2,940 –9.80

Savings from borrowing $50.20

Let’s see… Interest on the amount due of $3,000 less

the 2 percent…


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Looks like we should take advantage of the discount even if we

have to borrow the money.


Discount $60.00Interest for 20 days

at the rate of 6%on $2,940 –9.80

Savings from borrowing $50.20

JOURNAL


Ref. Dr Cr.

1

2

3

4

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On March 12, On March 12, NetSolutionsNetSolutions purchased purchased merchandise on account from Alpha merchandise on account from Alpha

Technologies, $3,000.Technologies, $3,000.

Mar. 12 Merchandise Inventory 3 000 002007

Accounts Payable—Alpha

Technologies 3 000 00


JOURNAL


Ref. Dr Cr.

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If payment is made by March 22 If payment is made by March 22 NetSolutionsNetSolutionsrecords the discount as a reduction in cost.records the discount as a reduction in cost.

Mar. 22 Accounts Payable—Alpha Technol. 3 000 00

Cash 2 940 00

Merchandise Inventory 60 00

2007


JOURNAL


Ref. Dr Cr.

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If If NetSolutionsNetSolutions does not pay the invoice until does not pay the invoice until April 11, it would pay the full amount.April 11, it would pay the full amount.

Apr. 11 Accounts Payable—Alpha Technol. 3 000 00

Cash 3 000 00

2007


Purchases Returns and AllowancesPurchases Returns and Allowances

A purchases return involves actually returning merchandise that is damaged or does not meet the

specifications of the order.

When the defective or incorrect merchandise is kept by the buyer and the vendor makes a price adjustment,

this is a purchases allowance.

NetSolutions received the NetSolutions received the delivery from Maxim delivery from Maxim

Systems and determined that Systems and determined that $900 of the items were not $900 of the items were not the merchandise ordered. the merchandise ordered.

DebitDebit memorandummemorandum #18 is #18 is issued to Maxim Systems.issued to Maxim Systems.


You sent me the wrong interface cards. We’ll send a debit memorandum with the

returned items.

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Mar. 7 Accounts Payable—Maxim Systems 900 00

Debit Memo No. 18


Purchases Returns and AllowancesPurchases Returns and Allowances Purchases Returns and AllowancesPurchases Returns and Allowances

On May 2, NetSolutions purchased $5,000 of merchandise from Delta Data Link,

subject to terms 2/10, n/30.

May 2 Merchandise Inventory 5 000 00

Purchased merchandise.

Accounts Payable—Delta Data 5 000 00


On May 4, NetSolutions returns $3,000 of the merchandise.

May 4 Accounts Payable—Delta Data Links 3 000 00

Returned portion of

merchandise purchased.

Merchandise Inventory 3 000 00


On May 12, NetSolutions pays the amount due.

May 12 Accounts Payable—Delta Data Links 2 000 00

Paid invoice.

Cash 1 960 00


($5,000 ($5,000 ––$3,000) x $3,000) x

2%2%

Transportation Transportation CostsCosts

FOB Shipping PointFOB Shipping Point

Buyer pays freight costs and debits Merchandise Inventory

Fruit Express

Title passes to buyer as shipment leaves shipping point.

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June 10 Merchandise Inventory 900 00

Purchased merchandise, terms

FOB shipping point.

Accounts Payable—Magna Data 900 00

10 Merchandise Inventory 50 00Cash 50 00

Paid shipping cost .

On June 10, On June 10, NetSolutionsNetSolutions buys merchandise from buys merchandise from Magna Data on account, $900, terms FOB shipping Magna Data on account, $900, terms FOB shipping

point and pays the transportation cost of $50.point and pays the transportation cost of $50.

FOB Shipping PointFOB Shipping Point FOB DestinationFOB Destination

Title passes to buyer upon arrival at

destination.

Seller pays freight costs and debits Transportation Out

Fruit Express

On June 15, On June 15, NetSolutionsNetSolutions sells merchandise to sells merchandise to KranzKranzCompany on account, $700, terms FOB destination. Company on account, $700, terms FOB destination.

The cost of the merchandise sold is $480. The cost of the merchandise sold is $480. NetSolutionsNetSolutions pays the transportation cost of $40.pays the transportation cost of $40.

FOB DestinationFOB DestinationJune 15 Accounts Receivable—Kranz Co. 700 00

Sold merchandise, terms FOB

destination.

Sales 700 00

15 Cost of Merchandise Sold 480 00Merchandise Inventory 480 00

Cost of sale of Kranz Co .

FOB DestinationFOB Destination

June 15 Transportation Out 40 00

Cash 40 00

Paid shipping cost on

merchandise sold.

On June 15, On June 15, NetSolutionsNetSolutions sells merchandise to sells merchandise to KranzKranzCompany on account, $700, terms FOB destination. Company on account, $700, terms FOB destination.

The cost of the merchandise sold is $480. The cost of the merchandise sold is $480. NetSolutionsNetSolutions pays the transportation cost of $40.pays the transportation cost of $40.

Sales TaxesSales Taxes

On August 12, merchandise is sold on On August 12, merchandise is sold on account to Lemon Company, $100. The account to Lemon Company, $100. The

state has a 6% sales tax.state has a 6% sales tax.

Aug. 12 Accounts Receivable—Lemon Co. 106 00

Sales 100 00

Sales Taxes Payable 6 00Invoice No. 339

Sales TaxesSales Taxes

On September 15, the seller sends in a On September 15, the seller sends in a payment of $2,900 to the taxing unit for payment of $2,900 to the taxing unit for

the August taxes collected.the August taxes collected.

Sept.15 Sales Tax Payable 2 900 00

Cash 2 900 00Payment for sales taxes

collected during August.

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Balance Sheet Accounts

200 Liabilities210 Accounts Payable211 Salaries Payable212 Unearned Rent215 Notes Payable

300 Owner’s Equity310 Chris Clark, Capital311 Chris Clark, Drawing312 Income Summary

100 Assets110 Cash112 Accounts Receivable115 Merchandise Inventory116 Office Supplies117 Prepaid Insurance120 Land123 Store Equipment124 Accumulated Depreciation—

Store Equipment125 Office Equipment126 Accumulated Depreciation—

Office Equipment

NetSolutionsChart of Accounts

Income Statement Accounts

600 Other Income610 Rent Revenue

700 Other Expense710 Interest Expense

400 Revenues410 Sales411 Sales Returns and

Allowances412 Sales Discounts

500 Costs and Expenses510 Cost of Merchandise Sold520 Sales Salaries Expense521 Advertising Expense522 Depreciation Expense—

Store Equipment523 Transportation Out529 Miscellaneous Selling Expense530 Office Salaries Expense531 Rent Expense532 Depreciation Expense—

Office Equipment533 Insurance Expense534 Office Supplies Expense539 Miscellaneous Admin. Expense

NetSolutionsChart of Accounts

The following selected transactions were completed by Cruise Co., during July of current of the year :

• 2 Juli: Purchased merchandise from Nadezh Co. $9,000, term FOB Shipping point, 2/10, n/eom. Prepaid transportation cost of $200 were added to the invoice.

• 3 Juli :Sold merchandise for $ 11,000, plus 5% sale s tax to cash customers. The cost of merchandise sold was $ 9,500.

• 4 Juli : Sold merchandise on account to Hogwart Co. $ 30,000, term FOB Destination 1/10 , n/30. The cost of merchandise sold was $ 25,500.

• 5 Juli :Sold merchandise to customer who used American Express Card, $20,100. The cost of merchandise sold was $18,000.

• 10 Juli : Issued credit memorandum for $7,500 to Hogwart Co. for merchandise returned from sale on July 4. The cost of merchandise sold was $ $7,000.

• 11 Juli : Sold merchandise for on account to Dumbledore Co. $ 9,600, term FOB shipping point, 2 /10, n/eom. Added $150 to the invoice for transportation cost prepaid. The cost of merchandise sold was $7,000.

• 12 Juli : Received check for amount due from Hogwar t Co. for sale on July 4

• 13 juli : Received check from American Express fo r non bank credit card on July 5,

• 17 Juli :Paid Nadezh Co. for invoice of July 2.• 24 Juli : Received on account from sale of July 1 1 to

Dumbledore Co.• 27Juli : Paid First Bank $900 for service fees for

handling Master Card sales during July

The EndThe End

acc. for merch. bus-rev [compatibility mode]

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