Lecture International accounting: Chapter 4 - Nguyễn Quốc Nhất

International accounting<br /> <br /> Chapter 4: Merchandising Operations<br /> <br /> LOGO<br /> <br /> Chapter 4<br /> <br /> MA. Nguyen Quoc Nhat<br /> <br /> Learning Objectives<br /> 1. Describe and illustrate merchandising operations and<br /> the two types of inventory systems<br /> 2. Account for the purchase of inventory using a perpetual<br /> system<br /> 3. Account for the sale of inventory using a perpetual<br /> system<br /> 4. Adjust and close the accounts of a merchandising<br /> business<br /> 5. Prepare a merchandiser’s financial statements<br /> 6. Use gross profit percentage, inventory turnover, and<br /> days in inventory to evaluate a business<br /> 7. Account for the sale of inventory using a periodic system<br /> 8. Prepare worksheets for a merchandiser<br /> www.themegallery.com<br /> <br /> Company Logo<br /> <br /> Chapter ‘s content<br /> 4.1 What Are Merchandising Operations?<br /> 4.2 Accounting for Inventory in the<br /> Perpetual System<br /> 4.3 Adjusting and Closing the Accounts of a<br /> Merchandiser<br /> 4.4 Preparing a Merchandiser’s Financial<br /> Statements<br /> 4.5 Three Ratios for Decision Making<br /> <br /> www.themegallery.com<br /> <br /> MA. NguyenQuocNhat<br /> <br /> Company Logo<br /> <br /> nhatnq.faa@gmail.com<br /> <br /> 1<br /> <br /> International accounting<br /> <br /> Chapter 4: Merchandising Operations<br /> <br /> 4.1 What Are Merchandising Operations?<br /> <br /> www.themegallery.com<br /> <br /> Company Logo<br /> <br /> 4.1 What Are Merchandising Operations?<br /> The operating cycle of a merchandiser is as follows :<br /> 1. It begins when the company purchases inventory<br /> from a vendor.<br /> 2. The company then sells the inventory to a customer.<br /> 3. Finally, the company collects cash from customers.<br /> <br /> www.themegallery.com<br /> <br /> Company Logo<br /> <br /> 4.1 What Are Merchandising Operations?<br /> Inventory Systems:<br /> There are two main types of inventory accounting<br /> systems:<br /> ● Periodic system<br /> ● Perpetual system<br /> <br /> www.themegallery.com<br /> <br /> MA. NguyenQuocNhat<br /> <br /> Company Logo<br /> <br /> nhatnq.faa@gmail.com<br /> <br /> 2<br /> <br /> International accounting<br /> <br /> Chapter 4: Merchandising Operations<br /> <br /> 4.1 What Are Merchandising Operations?<br /> Inventory Systems:<br /> There are two main types of inventory accounting<br /> systems:<br /> ● Periodic system - the business<br /> physically counts its inventory periodically to<br /> determine the quantities on hand<br /> ● Perpetual system - the number of inventory units<br /> and the dollar amounts are perpetually<br /> (constantly) updated.<br /> <br /> www.themegallery.com<br /> <br /> Company Logo<br /> <br /> 4.2 Accounting for Inventory in the<br /> Perpetual System<br /> Purchase of Inventory<br /> Suppose Smart Touch buys $35,000 of<br /> inventory, returns $700 of the goods, and<br /> takes a 2% early payment discount. Smart<br /> Touch also pays $2,100 of freight in. The<br /> following summary shows Smart Touch’s<br /> net cost of this inventory. All amounts are<br /> assumed for this illustration.<br /> <br /> www.themegallery.com<br /> <br /> Company Logo<br /> <br /> 4.2 Accounting for Inventory in the<br /> Perpetual System<br /> <br /> www.themegallery.com<br /> <br /> MA. NguyenQuocNhat<br /> <br /> Company Logo<br /> <br /> nhatnq.faa@gmail.com<br /> <br /> 3<br /> <br /> International accounting<br /> <br /> Chapter 4: Merchandising Operations<br /> <br /> 4.2 Accounting for Inventory in the<br /> Perpetual System<br /> Sale of Inventory<br /> Sales revenue (Sales): The amount a business earns<br /> from selling merchandise inventory.<br /> Cost of goods sold (COGS) (also known as Cost<br /> of sales or COS)is the cost of inventory that has<br /> been sold to customers.  the merchandiser’s<br /> major expense<br /> <br /> www.themegallery.com<br /> <br /> Company Logo<br /> <br /> 4.2 Accounting for Inventory in the<br /> Perpetual System<br /> Sale of Inventory<br /> A sales return: The customer may return goods to Smart<br /> Touch, asking for a refund or credit to the customer’s<br /> account.<br /> A sales allowance: Smart Touch may grant a sales<br /> allowance to entice the customer to accept non-standard<br /> goods. This allowance will reduce the future cash<br /> collected from the customer.<br /> A sales discount: If the customer pays within the<br /> discount period—under terms such as 2/10, n/30—Smart<br /> Touch collects the discounted amount.<br /> Freight out: Smart Touch may have to pay delivery<br /> expense to transport the<br /> goods to the buyer.<br /> www.themegallery.com<br /> <br /> Company Logo<br /> <br /> 4.3 Adjusting and Closing the Accounts of a<br /> Merchandiser<br /> A merchandiser adjusts and closes accounts the same<br /> way a service entity does. If a worksheet is used, the trial<br /> balance is entered, and the worksheet is completed to<br /> determine net income or net loss<br /> <br /> www.themegallery.com<br /> <br /> MA. NguyenQuocNhat<br /> <br /> Company Logo<br /> <br /> nhatnq.faa@gmail.com<br /> <br /> 4<br /> <br /> International accounting<br /> <br /> Chapter 4: Merchandising Operations<br /> <br /> 4.3 Adjusting and Closing the Accounts of a<br /> Merchandiser<br /> Closing still means to zero out all accounts that aren’t on<br /> the balance sheet. All amounts are assumed for this<br /> illustration.<br /> <br /> www.themegallery.com<br /> <br /> Company Logo<br /> <br /> 4.4 Preparing a Merchandiser’s Financial<br /> Statements<br /> Income Statement:<br /> The income statement begins with Sales,<br /> Cost of goods sold, and Gross profit. Then<br /> come the operating expenses, which are<br /> those expenses other than Cost of goods sold<br /> <br /> www.themegallery.com<br /> <br /> Company Logo<br /> <br /> 4.4 Preparing a Merchandiser’s Financial<br /> Statements<br /> Balance sheet:<br /> For a merchandiser, the balance sheet is the<br /> same as for a service business, except<br /> merchandisers have an additional current<br /> asset, Inventory. Service businesses have no<br /> inventory.<br /> <br /> www.themegallery.com<br /> <br /> MA. NguyenQuocNhat<br /> <br /> Company Logo<br /> <br /> nhatnq.faa@gmail.com<br /> <br /> 5<br /> <br />