Lecture International accounting: Chapter 4 - Nguyễn Quốc Nhất

Lecture "International accounting - Chapter 4: Merchandising operations" has content: What are merchandising operations, accounting for inventory in the perpetual system, adjusting and closing the accounts of a merchandiser, preparing a merchandiser’s financial statements, three ratios for decision making.
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Lecture International accounting: Chapter 4 - Nguyễn Quốc NhấtInternational accountingChapter 4: Merchandising OperationsLOGOChapter 4MA. Nguyen Quoc NhatLearning Objectives1. Describe and illustrate merchandising operations andthe two types of inventory systems2. Account for the purchase of inventory using a perpetualsystem3. Account for the sale of inventory using a perpetualsystem4. Adjust and close the accounts of a merchandisingbusiness5. Prepare a merchandiser’s financial statements6. Use gross profit percentage, inventory turnover, anddays in inventory to evaluate a business7. Account for the sale of inventory using a periodic system8. Prepare worksheets for a merchandiserwww.themegallery.comCompany LogoChapter ‘s content4.1 What Are Merchandising Operations?4.2 Accounting for Inventory in thePerpetual System4.3 Adjusting and Closing the Accounts of aMerchandiser4.4 Preparing a Merchandiser’s FinancialStatements4.5 Three Ratios for Decision Makingwww.themegallery.comMA. NguyenQuocNhatCompany Logonhatnq.faa@gmail.com1International accountingChapter 4: Merchandising Operations4.1 What Are Merchandising Operations?www.themegallery.comCompany Logo4.1 What Are Merchandising Operations?The operating cycle of a merchandiser is as follows :1. It begins when the company purchases inventoryfrom a vendor.2. The company then sells the inventory to a customer.3. Finally, the company collects cash from customers.www.themegallery.comCompany Logo4.1 What Are Merchandising Operations?Inventory Systems:There are two main types of inventory accountingsystems:● Periodic system● Perpetual systemwww.themegallery.comMA. NguyenQuocNhatCompany Logonhatnq.faa@gmail.com2International accountingChapter 4: Merchandising Operations4.1 What Are Merchandising Operations?Inventory Systems:There are two main types of inventory accountingsystems:● Periodic system - the businessphysically counts its inventory periodically todetermine the quantities on hand● Perpetual system - the number of inventory unitsand the dollar amounts are perpetually(constantly) updated.www.themegallery.comCompany Logo4.2 Accounting for Inventory in thePerpetual SystemPurchase of InventorySuppose Smart Touch buys $35,000 ofinventory, returns $700 of the goods, andtakes a 2% early payment discount. SmartTouch also pays $2,100 of freight in. Thefollowing summary shows Smart Touch’snet cost of this inventory. All amounts areassumed for this illustration.www.themegallery.comCompany Logo4.2 Accounting for Inventory in thePerpetual Systemwww.themegallery.comMA. NguyenQuocNhatCompany Logonhatnq.faa@gmail.com3International accountingChapter 4: Merchandising Operations4.2 Accounting for Inventory in thePerpetual SystemSale of InventorySales revenue (Sales): The amount a business earnsfrom selling merchandise inventory.Cost of goods sold (COGS) (also known as Costof sales or COS)is the cost of inventory that hasbeen sold to customers.  the merchandiser’smajor expensewww.themegallery.comCompany Logo4.2 Accounting for Inventory in thePerpetual SystemSale of InventoryA sales return: The customer may return goods to SmartTouch, asking for a refund or credit to the customer’saccount.A sales allowance: Smart Touch may grant a salesallowance to entice the customer to accept non-standardgoods. This allowance will reduce the future cashcollected from the customer.A sales discount: If the customer pays within thediscount period—under terms such as 2/10, n/30—SmartTouch collects the discounted amount.Freight out: Smart Touch may have to pay deliveryexpense to transport thegoods to the buyer.www.themegallery.comCompany Logo4.3 Adjusting and Closing the Accounts of aMerchandiserA merchandiser adjusts and closes accounts the sameway a service entity does. If a worksheet is used, the trialbalance is entered, and the worksheet is completed todetermine net income or net losswww.themegallery.comMA. NguyenQuocNhatCompany Logonhatnq.faa@gmail.com4International accountingChapter 4: Merchandising Operations4.3 Adjusting and Closing the Accounts of aMerchandiserClosing still means to zero out all accounts that aren’t onthe balance sheet. All amounts are assumed for thisillustration.www.themegallery.comCompany Logo4.4 Preparing a Merchandiser’s FinancialStatementsIncome Statement:The income statement begins with Sales,Cost of goods sold, and Gross profit. Thencome the operating expenses, which arethose expenses other than Cost of goods soldwww.themegallery.comCompany Logo4.4 Preparing a Merchandiser’s FinancialStatementsBalance sheet:For a merchandiser, the balance sheet is thesame as for a service business, exceptmerchandisers have an additional currentasset, Inventory. Service businesses have noinventory.www.themegallery.comMA ...