The Big Picture…
BUS 2101
Decision Making
Financial Information
Business Activities
Financial Statement Analysis
Users
Operating
Financial Statements
Annual Reports
Ratios
External
Investing
GAAP
Management Discussion
Liquidity
Internal
Financing
Income Statement
Notes
Profitability
Statement of Cash Flow
Auditor’s Report
Solvency
Balance Sheet
Statement of Retained Earnings
Preparation
Market
Merchandising Operations
•
•
•
•
Inventory systems
Purchases of merchandise
Sales of merchandise
Income statement for merchandisers
Inventory systems
Inventory Systems
Perpetual
Periodic
Keep track
Count at end
COGS each sale
COGS at end
Purchase of merchandise
Perpetual
Merchandise Inventory
A/P
680
680
Use Merchandise Inventory
account for only inventory,
not supplies, equipment,
etc.
Return of merchandise purchases
Perpetual
A/P
Merchandise Inventory
680
680
Freight on merchandise purchased
Perpetual
Merchandise Inventory
10
A/P
10
Freight for merchandise
purchased is part of the cost
of an asset, Merchandise
Inventory
Freight on merchandise sold
Perpetual
Freight expense
10
A/P
10
Freight for merchandise sold
is an expense.
Purchase discounts
Perpetual
A/P
100
Cash
Merchandise Inventory
Discount for 2/10, n/60.
Reduces cost of
inventory.
98
2
Sales of merchandise
Perpetual
A/R
100
Sales (Revenue)
Cost of goods sold
Merchandise Inventory
100
60
60
Returns of merchandise sold
Perpetual
Negative
revenue
Sales R&A
50
A/R
If merchandise is o.k.
Merchandise Inventory
COGS
50
20
20
Sales discounts
Perpetual
Cash
Sales Discounts
A/R
Sales Discounts is a
negative revenue
account.
98
2
100
Income Statement Merchandiser
Net sales
100,000
Cost of goods sold
60,000
Gross profit
Selling and admin expenses
Net income
40,000
25,000
15,000
Income Statement Merchandiser
Acme
Anvils
Aggie
Anvils
100,000
200,000
Sales returns and allowances
1,000
80,000
Sales discounts
2,000
22,000
98,000
98,000
Sales
Net sales
What conclusions can you
make about Aggie Anvils?
The Big Picture…
BUS 2101
Decision Making
Financial Information
Business Activities
Financial Statement Analysis
Users
Operating
Financial Statements
Annual Reports
Ratios
External
Investing
GAAP
Management Discussion
Liquidity
Internal
Financing
Income Statement
Notes
Profitability
Statement of Cash Flow
Auditor’s Report
Solvency
Balance Sheet
Statement of Retained Earnings
Preparation
Market