Slide 9
P1
Invoice

Main Source, Inc.
Invoice
614 Tech Avenue Nashville, TN 37651
S o l d
T

o

Date
5/4/09
Number 358-BI
Name: Barbee, Inc.
Attn: Tom Bell
Address: One Willow Plaza
McGraw-Hill/Irwin
Slide 8
P1
TRADE DISCOUNTS
Used by manufacturers and wholesalers to offer better prices for greater quantities purchased.
Example
Z-Mart offers a 30% trade discount on orders of 1,000 units or more of their popular
Examples: sporting goods, clothing, and auto parts stores
Net Sales
Minus
Cost of Equals
Goods Sold
Gross Profit
Minus
Expenses
Equals Net
Income
Merchandising Company Income Statement
On November 2, Z-Mart purchased $1,200 of merchandise inventory for cash.
Nov 2
Merchandise Inventory Cash
Purchase merchandise for cash
Dr. 1,200
Cr. 1,200
Examples: Accounting firms, law firms and plumbing services
Revenues
Minus
Equals Expenses
Net income
McGraw-Hill/Irwin
Slide 2
C1
MERCHANDISING ACTIVITIES
Merchandising Companies
product Racer. Each Racer has a list price of $5.25.
McGraw-Hill/Irwin
Quantity sold Price per unit Total Less 30% discount Invoice price
1,000 $ 5.25
5,250 (1,575) $ 3,675
Slide 6
C3
PERPETUAL AND PERIODIC
INVENTORY SYSTEMS
Perpetual systems
continually update accounting records for merchandising transactions
Periodic systems
Cookeville, Tennessee
38501


Seller Invoice date Purchaser Order date Credit terms Freight terms
P.O. Date Salesperson 4/25/2009 #25
Terms 2/10,n/30
Cash Sale
Purchases
Credit Sale
Cash collection
Purchases
Cash sales
Account receivable
Merchandise inventory
McGraw-Hill/Irwin
Merchandise inventory
Credit sales
ACCOUNTING FOR MERCHANDISING OPERATIONS
Chapter 5
© 2009 The McGraw-Hill Companies, Inc.,
SERVICE COMPANIES
Service organizations sell time to earn revenue.
Slide 5
C3
INVENTORY SYSTEMS
Beginning inventory
+
Net cost of purchases
= Merchandise available for sale
Ending inventory
McGraw-Hill/Irwin
+
Cost of goods sold
Manufacturer
Wholesaler
ler
Customer
McGraw-Hill/Irwin
Slide 3
C1
REPORTING INCOME FOR A
MERCHANDISER
Merchandising companies sell products to earn revenue.
For Year Ended December 31, 2009
McGraw-Hill/Irwin
Net sales Cost of goods sold Gross profit Operating expenses Net income
$ 150,000 80,000
$ 70,000 46,500
Freight FOB Destination
ViaSFheipdExGoods
Item AC417
Description 250 Backup System
$ 23,500
Slide 4
C2
OPERATING CYCLE FOR A
MERCHANDISER
Begins with the purchase of merchandise and ends with the collection of cash from the
sale of merchandise.
accounting records relating to merchandise transactions are updated only at the end of the accounting period
McGraw-Hill/Irwin
Slide 7
P1
MERCHANDISE PURCHASES