Chapters 15 and 16:
INVENTORY CONTROL and End
of FP Reports
Review Accounting Cycle for every Fiscal Period:
Journalize transactions daily (as they occur) in a General
Journal
Post individual account activity and ending monthly balances
from the Journal to individual General Ledgers
Depreciate any assets that lost value during the fiscal
period and update their new account values on a Work
Sheet
Update All account balances on a Trial Balance Sheet:
1.
2.
3.
4.
Temporary and Permanent accounts
Temporary accounts: Sales, Expenses and Drawing



5.
6.
7.
8.
These account values must be made to $0.00 at the end of every FP
Permanent accounts: all other A, L, and OE accounts other
than Sales, Expenses and Drawing
Close out all temporary accounts and transfer data from
permanent accounts to the next fiscal period’s account
balances
Create and Post Financial Statements: Cash Flow
Statement, Balance Sheet, Income Statement
Analyze the Financial Statements.
Make decisions to improve the Business.
Accounting End of FP
Responsibilities

application 15-1 template ANSWER
KEY.xls
Steps:
Complete the Work Sheet
1.
1.
2.
3.
2.
3.
4.
5.
Trial Balance Data taken from General Ledgers
Depreciate Inventory, Supplies and Insurance
Update BS and IS Balances due to depreciation
Statement of Owner’s Equity
Complete Income Statement, showing Sales
%s and Chart of Expenses
Complete Industry Standards Test: Pass or
Fail 4 tests
Complete Balance Sheet
Work Sheet

A planning form to assist in creating
Financial Statements by allowing the
Accountants to Depreciate assets here
 List of General Ledger Account Balances

Adjustments needed for:
 Merchandise Inventory
 Supplies – store and office
 Insurance Policies
Difference in Asset
terminology

Inventory – total amount of goods on
hand – on the floor of the retailer and
in the “back room” waiting to be put on
the merchandising floor

Merchandise Inventory - amount of
goods on hand FOR SALE – only on the
floor of the retailer
Reason for Adjustment to
Merchandise Inventory, M.I.

Throughout the fiscal period, no journal entries
have been made to the account, M.I., so the value
has stayed the same – this asset value is
inaccurate



When we buy merchandise to re-sell, the Purchases
account is affected
When we sell the merchandise to customer, the Sales
account is affected
We need to update the M.I. value to reflect the
actual worth of inventory in the store

A physical inventory count must be performed.
Income Summary Account


Temporary account used to off-set the
adjusting entry to update merchandise
inventory
The Income Summary account is not
classified as an A, L, OE, R, or Ex

it is used when an account transaction needs to
be closed/updated (every debit needs a credit)
Besides Sales, why your physical
inventory count may not match your
$$ on the Trial Balance
INVENTORY SHRINKAGE:
http://www.youtube.com/watch?v=tPo4OzrCIGM&safety_mode=true
&persist_safety_mode=1
1.
2.
3.
4.
5.
Damage to inventory making it Un-Sellable
Theft of inventory by employees
Theft of inventory by shoppers
Lost inventory
Expiration of inventory (food/seasonal items)
1.
Any item with a “shelf-life”
How to Control Accounting:
Invest in Software


#1 selling Inventory Management
Software: Fishbowl
Fishbowl works with QuickBooks



The best selling Accounting Software
http://www.youtube.com/watch?v=7XXwMxFKhto&feature=related&safety_mode=true
&persist_safety_mode=1
How Amazon tracks their inventory:

http://www.youtube.com/watch?v=HOicZ_AgsSA&safety_mode=true&persist_safety_mode=1
The 7 most important features
of Accounting Software

QuickBooks Pro 2011
Hand-out

http://accounting-software-review.toptenreviews.com/quickbooks-review.html

Wal-Mart struggling with rising
theft: December 14, 2011



The world’s largest retailer is experiencing an increase in
shrinkage at its U.S. stores
Inventory losses due to shoplifting, employee theft,
paperwork errors and supplier fraud is worsening.
Shrinkage estimates are at $3 billion for 2011 which
generated sales of $348.6 billion so far this year



Explained on the INCOME STATEMENT
The company also said that the gross profit margin fell for
all Wal-Mart Stores by 0.1 percentage points in the first
quarter due in part to “higher inventory shrinkage.”
Theft is a big problem for all retailers, costing them $41.6
billion last year
Shrinkage reduces your net
profit and increases your
expenses
 A problem that the
Accounting dept must help
Management resolve

Mastery Problem in Excel
Complete

Work Together



Text page 371
Workbook page 371 and 373
On Your Own


Text page 372
Workbook page 372 and 374