Principles of Accounting BBUS - Chapter 5_Merchandising

Accounting Principles Fourteenth Edition Weygandt Kimmel Mitchell Chapter 5 Accounting for Merchandising Operations This slide deck contains animations. Please disable animations if they cause issues with your device. Copyright ©2021 John Wiley & Sons, Inc. Chapter Outline Learning Objectives LO 1 Describe merchandising operations and inventory systems. LO 2 Record purchases under a perpetual inventory system. LO 3 Record sales under a perpetual inventory system. LO 4 Apply the steps in the accounting cycle to a merchandising company. LO 5 Prepare a multiple-step income statement. Copyright ©2021 John Wiley & Sons, Inc. 2 Merchandising Operations and Inventory Systems LEARNING OBJECTIVE 1 Describe merchandising operations and inventory systems. Merchandising Companies Buy and Sell Goods The primary source of revenues is referred to as sales revenue or sales. LO 1 Copyright ©2021 John Wiley & Sons, Inc. 3 Income Measurement Process for a Merchandising Company Cost of goods sold is the total cost of merchandise sold during the period. LO 1 ILLUSTRATION 5.1 Copyright ©2021 John Wiley & Sons, Inc. 4 Operating Cycles—Service Company ILLUSTRATION 5.2 LO 1 Copyright ©2021 John Wiley & Sons, Inc. 5 Operating Cycles—Merchandising Company ILLUSTRATION 5.3 Ordinarily is longer than that of a service company. LO 1 Copyright ©2021 John Wiley & Sons, Inc. 6 Flow of Costs ILLUSTRATION 5.4 Companies use a perpetual or a periodic inventory system. LO 1 Copyright ©2021 John Wiley & Sons, Inc. 7 Flow of Costs—Perpetual System • Maintain detailed records of cost of each inventory purchase and sale • Records continuously show inventory that should be on hand for every item • Company determines cost of goods sold each time a sale occurs LO 1 Copyright ©2021 John Wiley & Sons, Inc. 8