Session 8
Merchandising
Operations
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Merchandising
Operations
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Basic Flow
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Purchase of Inventory
Sales of Merchandise
Inventory Systems
Merchandising Transactions
F/S Overview
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Inventory Methods
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Perpetual
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Revenue and COGS—on-going
B+I-O=E
Periodic
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Revenue only; count inventory; calculate
COGS
B+I-E=O
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Purchasing Transactions
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Purchases
Freight and other misc. costs
Returns
Discounts
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Sales Transactions
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Shipment
Returns
Discounts
Use contra accounts
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Closing Entries
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Temporary accounts
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Zero them out
Revenue, expenses and dividends
Permanent accounts
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Retained earnings is the final location
for the temporary accounts
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Merchandising
Transactions
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See Summary on p. 235-236
Note: we do not use the Income
Summary; we balance the closing
entry directly into Retained Earnings
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Financial Statement
Overview
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Multi-step Income Statement—p. 237
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Non-operating activities—p. 236
Classified Balance Sheet—p. 238-239
Statement of Shareholders’ Equity
Statement of Cash Flows
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Financial Statement
Preparation
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Headings are IMPORTANT
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Company, Title and Date
Note how the T-Account balances
track to the actual financial
statements
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Expanded Income
Statement
Revenue
- Cost of Goods Sold
= Gross Margin
- Operating expenses
= Operating income
+/- Other income and expense
= Income before taxes
Income taxes
= Net income
FINANCIAL ACTG. - BUS 020 - SPRING 2015
A Closer Look at the
Balance Sheet
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Current assets
Non-current assets
Current liabilities
Long-term debt
Shareholders’ equity
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Contributed capital
Retained earnings
Dividends
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Financial Statement
Relationships
Balance Sheet
Current
Assets
Noncurrent
Assets
Current
Liabilities
Longterm
Debt
Income Statement
Revenue
Cost of Goods
Sold (COGS)
Gross Margin
Operating Exps.
Statement of Cash Flows
Operating Cash
FINANCIAL ACTG. - BUS 020 - SPRING 2015
Beginning S/E
Investing Cash
Financing Cash
Change in Cash
Net Income
Less: Dividends
Beginning Cash
Equity
Net Income
Stmt of Sharehldrs Eq.
Ending Cash
Ending S/E
Let’s Do It!
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See p. 242
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Create a Multi-step Income Statement
Create a Classified Balance Sheet
Create a Statement of Shareholder’s
Equity
FINANCIAL ACTG. - BUS 020 - SPRING 2015