Reporting Financial Performance Q Merchandising companies sell merchandise to earn revenue. I Examples: sporting goods, clothing, and auto parts stores [上m ross Net Profit Expenses Income Task Team of FUNDAMEnTAL ACCOUNTING Business School. Sun Yat sen University 6
6 Reporting Financial Performance
Operating Cycle of Merchandise Companies Q Begins with the purchase of merchandise and ends with the collection of cash from the sale of merchandise Cash sale Credit sale Cash l Purchases collection Purchases Cash sales Merchandise Account Merchandise inventory receivable Inventory Credit sales」 Task Team of FUNDAMEnTAL ACCOUNTING Business School. Sun Yat sen University 7
7 Operating Cycle of Merchandise Companies
Merchandising Cost Accounts Beginning inventory+ Net cost of Year 1 purchases Merchandise available for sale Ending Inventory+ Cost of Goods Income Year 1 Sold Statement Becomes beginning Balance inventory of Year 2 Sheet Task Team of FUNDAMEnTAL ACCOUNTING Business School. Sun Yat sen University 8
8 Merchandising Cost Accounts
Inventory Systems ◆ Perpetual method Gives a continual record of the amount of inventory on hand. When an item is sold it is recorded in the Cost of Goods Sold account ◆ Periodic method Requires updating the inventory account only at the end of the period, Acquisition of merchandise inventory is recorded in a temporary purchases account Task Team of FUNDAMEnTAL ACCOUNTING Business School. Sun Yat sen University 9
9
Inventory Systems Q Perpetual provides a continuous record of: The amount of inventory on hand. Cost of goods sold to date. Q Periodic requires a physical count of goods to determine. The amount of inventory on hand Cost of goods sold. Task Team of FUNDAMEnTAL ACCOUNTING Business School. Sun Yat sen University 10
10 t Perpetual provides a continuous record of: The amount of inventory on hand. Cost of goods sold to date. tPeriodic requires a physical count of goods to determine: The amount of inventory on hand. Cost of goods sold