Bài giảng Fundamental Financial Accounting Concepts - Chapter 4: Accounting for Merchandising Businesses

Chapter FourAccounting for Merchandising BusinessesMcGraw-Hill/IrwinMcGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.Merchandising BusinessesSaleMerchandising businesses generate revenue by selling goods. The goods purchased for resale are called merchandise inventory.4-*Product Costs Versus Selling and Administrative CostsProduct CostsCosts that are included in inventory.Selling & Admin. CostsCosts that are not included in inventory. They are sometimes called period costs.4-*Allocation of Inventory Cost Between Asset and Expense AccountsCost of Goods Available for SaleMerchandise Inventory (Balance Sheet)Cost of Goods Sold (Income Statement)4-*Gross Margin (or Gross Profit)4-*Perpetual Inventory SystemPerpetual Inventory SystemInventory account is adjusted perpetually (continually) throughout the accounting period.4-*4-*4-*A deduction from the invoice price granted to induce early payment of the amount due.TermsTimeDueDiscount PeriodFull amountless discountCredit PeriodFull amount duePurchase or SaleCash Discounts4-*2/10, n/30Percentage of Discount# of Days Discount Is AvailableOtherwise, the Full Amount Is Due # of Days when Full Amount Is DueCash Discounts4-*Transportation CostsFOB shipping point(buyer pays)FOB destination(seller pays)MerchandiseSellerBuyerFOB = Free on Board4-*Gains and LossesGains and LossesSales Price of Land- Cost of LandGain or LossGross marginSales RevenueCost of Goods SoldGross Margin4-*4-*Lost, Damaged, or Stolen InventoryMost merchandise companies experience some level of inventory shrinkage, a term that reflects decreases in inventory for reasons other than sales to customers.4-*4-*Gross Margin PercentageGross MarginNet SalesThis measure indicates how muchof each sales dollar is left after deducting the cost of goods sold to cover expenses and provide a profit.Other things being equal, the company with the higher gross margin percentage is pricing its products higher.4-*Return on SalesNet IncomeNet SalesNet income expressed as a percentage of sales provides insight as to how much of each sales dollar is left as net income after all expenses are paid.Other things being equal, the company with the higher return on sales percentage is doing a better job of controlling costs.4-*Periodic Inventory System (Appendix)A practical alternative for recording inventory in a low-technology, high-volume environmentCost of inventory is recorded in a Purchases accountEnding inventory and cost of goods sold are determined by year-end physical count4-*4-*Periodic Inventory System (Appendix)4-*End of Chapter Four4-*