Falcon Invoice Discounting: Unlock Your Business Potential
Marchandis
1. ACCT 201
Reporting and
4
Chapter
Analyzing Merchandising
Activities
ACCT 201
UAA – ACCT 201
ACCT 201
Principles of Financial
Accounting
Dr. Fred Barbee
2. ACCT 201
Service Organizations
Service organizations sell time to
ACCT 201
earn revenue.
Examples: accounting firms, law
firms, and plumbing services.
ACCT 201
3. ACCT 201
Service Organizations
Income Statement
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Service Firm
Fees Earned $50,000
Operating Expenses 36,000
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Net Income $14,000
4. ACCT 201
Merchandising Companies
Merchandising companies sell
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products to earn revenue.
Examples: sporting goods,
clothing, and auto parts stores
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5. ACCT 201
Merchandising Companies
Income Statement
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Merchandising Firm
Sales $150,000
Cost of Goods Sold 90,000
Gross Profit (Margin) $60,000
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Operating Expenses 35,000
Net Income $25,000
7. ACCT 201
Merchandising Companies
ACCT 201
Merchandising Company
Balance Sheet
December 31, 2002
Assets Liabilities
Cash $ 10,200 Accounts payable $ 1,200
Merchandise Inventory 1,200 Notes payable 4,000
Equipment 16,000 Total liabilities $ 5,200
Equity 22,200
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Total liabilities and
Total assets $ 27,400 equity $ 27,400
8. Classified Balance Sheet
ACCT 201 Toys-For-Kids, Inc.
Balance Sheet
December 31, 2002
Assets
Current assets
Cash $ 24,580
Accounts receivable 98,400
Merchandise inventory 125,090
Supplies 4,700
Prepaid insurance 6,800
Total current assets $ 259,570
Plant assets
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Land 75,000
Building $ 421,500
Less: accumulated depreciation 117,200 304,300
Equipment 114,720
Less: accumulated depreciation 41,900 72,820
Furniture and fixtures 62,800
Less: accumulated depreciation 21,000 41,800
Total plant assets 493,920
Total assets $ 753,490
Liabilities
Current liabilities
Accounts payable $ 187,600
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Wages payable 15,875
Short-term bank note 25,000
Total current liabilities $ 228,475
Long-term notes payable 275,000
Equity
Common stock 200,000
Retained earnings 50,015
Total liabilities and equity $ 753,490
9. ACCT 201
Operating Cycle
Begins with the purchase of
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merchandise and ends with the
collection of cash from the sale
of merchandise.
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10. ACCT 201
Operating Cycle – Cash Sale
Sale
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Purchases
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Inventory
11. Operating Cycle – Credit Sale
Sale
Accounts
Receivable
Inventory
Collection
Purchases
12. ACCT 201
Inventory Systems
Beginning
inventory + Net cost of
purchases
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Merchandise
available for sale
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Cost of
Ending
Inventory + Goods
Sold
13. ACCT 201
Periodic
ACCT 201
Inventory
Systems
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14. ACCT 201
Periodic Inventory System
Physically count inventory, usually at
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end of accounting period.
No detailed records of the actual
inventory are maintained during the
accounting period.
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Less costly than perpetual inventory
method, but provides less
information.
15. Periodic Inventory Method
When
Inventory is
Accts. Payable Purchased Pur. Disc.
xxx xxx
Purchases
xxx
Pur. R&A Inventory
xxx BI xxx
The Inventory Account is not
updated when inventory is
purchased.
16. Cost of Goods Sold
Component Amount
Beginning Inventory $52,800
Net Purchases 126,860
Goods Available for Sale 179,660
Less: Ending Inventory 48,300
Cost of Goods Sold $131,660
18. ACCT 201
Perpetual Inventory System
Continuous records are kept of the
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quantity and, usually, the cost of
individual items as they are bought
and sold.
More effective for providing
ACCT 201
information about quantities and
ensuring optimal customer service.
19. Perpetual Inventory Method
Accts. Pay Pur. Disc.
xxx xxx
Purchases
When
Purchased xxx
Pur. R&A Inventory
xxx COGS xxx xxx
xxx
When
Sold
20. ACCT 201
Perpetual Inventory System
In a perpetual inventory system, each
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purchase and sale of merchandise is
recorded in an inventory account.
In this way, the inventory records
always (perpetually) disclose the
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amount of inventory on hand the the
amount sold.
22. ACCT 201
Merchandise Purchases
On June, 20, Melton Company
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purchased $14,000 of merchandise
inventory paying cash.
GENERAL JOURNAL Page 55
Date Description PR Debit Credit
Jun 20 Merchandise Inventory 14,000
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Cash 14,000
23. ACCT 201
Main Source, Inc. Invoice
614 Tech Avenue Date Number
Nashville, TN 37651 5/4/02 358-BI
S
o Barbee, Inc.
Name: Seller Invoice date Purchaser
Invoice
l
d
Attn: Tom Bell Order number Credit terms
Order number Credit terms
Address: One Willow Plaza
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T Cookeville, Tennessee Freight terms Goods Invoice amount
Goods Invoice amount
o 38501
P.O. 167 Sales: 25 Terms 2/10,n/30 Ship: FedEx Prepaid
Item Description Quanity Price Amount
AC417
250 Backup System 500 $ 54.00 $ 27,000
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Sub Total 27,000
We appreciate your business! Ship Chg. -
Tax -
Total $ 27,000
24. ACCT 201
Trade Discounts
Used by manufacturers and
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wholesalers to change selling prices
without republishing their catalogs.
Example
JenCo, Inc. offers a 30% trade
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discount on orders of 1,000
units or more of their popular
product Racer. Each
Racer has a list price of $5.25.
25. Purchase Discounts
A deduction from the invoice
price granted to induce early
payment of the amount due.
Terms
Discount Period Credit Period
Time
Full amount Full amount due
Due less discount
Purchase or Sale Exhibit 4-7
26. Purchase Discounts
2/10,n/30
Number of
Number of
Days
Days Otherwise,
Otherwise,
Discount
Discount Discount Is
Discount Is Net (or All)
Net (or All) Credit
Credit
Percent
Percent Available
Available Is Due
Is Due Period
Period
27. ACCT 201
Purchase Discounts
On May 7, Martin, Inc. purchased
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$27,000 of Merchandise Inventory
on account, credit terms are 2/10,
n/30.
GENERAL JOURNAL Page 49
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Date Description PR Debit Credit
May 7 Merchandise Inventory 27,000
Accounts Payable 27,000
28. ACCT 201
Purchase Discounts
On May 15, Martin, Inc. paid the
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amount due on the purchase of May 7.
GENERAL JOURNAL Page 55
Date Description PR Debit Credit
May 15 Accounts payable 27,000
Cash 26,460
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Merchandise inventory 540
$27,000 × 2% = $540 discount
29. ACCT 201
Purchase Discounts
After we post these entries, the
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accounts involved look like this:
Merchandise Inventory
Accounts Payable
5/7 27,000 5/15 540 5/15 27,000 5/7 27,000
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Bal. 26,460
Bal. 0
30. ACCT 201
Managing Discounts Annual
Rate
If we fail to take a 2/10, n/30
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discount, is it really expensive?
365 / 20 X 2% = 36.5%
Days in Percent paid to keep
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Year money
Number of additional days
before payment
31. Purchase Returns and
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Allowances
Purchase Return . . .
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Merchandise returned by the
purchaser to the supplier.
Purchase Allowance . . .
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A reduction in the cost of
defective merchandise received by
a purchaser from a supplier.
32. Purchase Returns and
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Allowances
On May 9, Barbee, Inc. purchased
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$20,000 of Merchandise Inventory
on account, credit terms are 2/10,
n/30.
GENERAL JOURNAL Page 34
Date Description PR Debit Credit
ACCT 201
May 9 Merchandise Inventory 20,000
Accounts Payable 20,000
33. Purchase Returns and
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Allowances
On May 10, Barbee, Inc. returned
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$500 of defective merchandise to
the supplier.
GENERAL JOURNAL
JOURNAL Page 37
Page 37
Date Description
Description PR Debit Credit
PR Debit Credit
ACCT 201
May 10 Accounts payable 500
Merchandise Inventory 500
34. Purchase Returns and
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Allowances
On May 18, Barbee, Inc. paid the
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amount owed for the May 9 purchase.
GENERAL JOURNAL Page 61
Date Description PR Debit Credit
May 18 Accounts payable 19,500
Merchandise inventory 390
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Cash 19,110
36. ACCT 201
Transportation Costs
On May 12, Barbee, Inc. purchased
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$8,000 of Merchandise for cash and
also paid $100 transportation costs.
GENERAL JOURNAL Page 39
Date Description PR Debit Credit
ACCT 201
May 12 Merchandise Inventory 8,100
Cash 8,100
37. Recording Purchases
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Information
Matrix, Inc.
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Total Cost of Merchandise Purchases
For Year Ended December 31, 2002
Invoice cost of merchandise purchases $ 692,500
Less:
Purchase discounts received (10,388)
Purchase returns and allowances (4,275)
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Add:
Cost of transportation-in 4,895
Total cost of merchandise purchases $ 682,732
39. ACCT 201
Sales Transactions
On March 18, TwoCom sold $25,000
of merchandise on account. The
merchandise was carried in
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inventory at a cost of $18,000.
GENERAL JOURNAL Page 3
Date Description PR Debit Credit
Mar. 18 Accounts Receivable 25,000
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Sales 25,000
Cost of Goods Sold 18,000
Merchandise Inventory 18,000
40. ACCT 201
Sales Discounts
On June 8, Borey Co. sold
merchandise costing $3,500 for
$6,000 on account. Credit terms
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were 2/10, n/30.
GENERAL JOURNAL Page 3
Date Description PR Debit Credit
Jun 8 Accounts Receivable 6,000
Sales 6,000
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Cost of Goods Sold 3,500
Merchandise Inventory 3,500
41. ACCT 201
Sales Discounts
On June 17, Borey Co. received a
check for $5,880 in full payment of
the June 8 sale.
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ACCT 201
42. ACCT 201
Sales Returns and Allowances
On June 12, Borey Co. sold merchandise
costing $4,000 for $7,500 on account
The credit terms were 2/10, n/30.
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GENERAL JOURNAL Page 4
Date Description PR Debit Credit
Jun 12 Accounts Receivable 7,500
Sales 7,500
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Cost of Goods Sold 4,000
Merchandise Inventory 4,000
43. ACCT 201
Sales Returns and Allowances
On June 14, merchandise with a sales
price of $800 and a cost of $470 was
returned to Borey. The return is
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related to the June 12 sale.
GENERAL JOURNAL Page 3
Date Description PR Debit Credit
Jun 14 Sales Returns and Allowances 800
Accounts Receivable 800
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Merchandise Inventory 470
Cost of Goods Sold 470
44. ACCT 201
Sales Returns and Allowances
On June 20, Borey received the
amount owed to it from the sale of
June 12.
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GENERAL JOURNAL Page 6
Date Description PR Debit Credit
Jun 20 Cash 6,566
Sales Discounts 134
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Account Receivable 6,700
45. Exh.
ACCT 201 6-11
Recording Sales Information
ACCT 201
ACCT 201
Sales discounts and returns
Sales discounts and returns
and allowances are
and allowances are
Contra Revenue accounts.
Contra Revenue accounts.
Notas do Editor
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee