1 Accounting for Merchandising BusinessesChapter 6 Accounting for Merchandising Businesses Accounting, 21st Edition Warren Reeve Fess © Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc. PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University

2 Nature of Businesses Perusahaan Jasa Fees earned $XXXOperating expenses –XXX Net income $XXX

3 Merchandising BusinessNature of Businesses Merchandising Business Sales $XXX Cost of Merchandise Sold –XXX Gross Profit $XXX Operating Expenses –XXX Net Income $XXX

4 Cost of Merchandise PurchasedPurchases $521,980 Less: Purchase returns and allowances $9,100 Purchase discounts 2, ,625 Net purchases $510,355 Add transportation-in ,400 Cost of merchandise purchased $527,755

5 Cost of Merchandise SoldMerchandise inventory, 1/1/07 $ 59,700 Purchases $521,980 Less: Purchase returns and allowances $9,100 Purchase discounts 2, ,625 Net purchases $510,355 Add transportation-in ,400 Cost of merchandise purchased ,755 Merchandise available for sale $587,455 Less merchandise inventory, 12/31/ ,150 Cost of merchandise sold $525,305

6 Multiple-Step Income Statement

7 NetSolutions Income Statement For the Year Ended December 31, 2007Revenue from sales: Sales $720,185 Less:Sales returns and allowances $ 6, Sales discounts 5, ,930 Net sales $708,255 Cost of merchandise sold 525,305 Gross profit $182,950 Continued

8 Continued Operating expenses: Selling expenses:Sales salaries expense $56,230 Advertising expense 10,860 Depr. Expense–store equipment 3,100 Miscellaneous selling expense Total selling expenses $ 70,820 Administrative expenses: Office salaries expense $21,020 Rent expense 8,100 Depr. expense–office equipment 2,490 Insurance expense 1,910 Office supplies expense 610 Misc. administrative expense Total admin. expenses ,890 Total operating expenses ,710 Income from operations $ 77,240 Continued

9 Other income and expenses:Rent revenue $ 600 Interest expense (2,440) (1,840) Net income $75,400 Concluded

10 Single-Step Income Statement for a Merchandising Business

11 NetSolutions Income Statement For the Year Ended December 31, 2007Revenues: Net sales $708,255 Rent revenue Total revenues $708,855 Expenses: Cost of merchandise sold $525,305 Selling expenses 70,820 Administrative expenses 34,890 Interest expense ,440 Total expenses ,455 Net income $ 75,400

12 Statement of Owner’s Equity for a Merchandising Business

13 Chris Clark, capital, 1/1/07 $153,800 Net income for year $75,400 NetSolutions Statement of Owner’s Equity For the Year Ended December 31, 2007 Chris Clark, capital, 1/1/07 $153,800 Net income for year $75,400 Less withdrawals 18,000 Increase in owner’s equity ,400 Chris Clark, capital, 12/31/07 $211,200

14 Statement of Financial Position

15 NetSolutions Statement of Financial Position December 31, 2007Assets Current assets: Cash $52,950 Accounts receivable 91,080 Merchandise inventory 62,150 Office supplies 480 Prepaid insurance 2, Total current assets $209,310 Continued

16 Property, plant, and equipment: Land $20,000 Store equipment $27,100 Less accumulated depreciation 5,700 21,400 Office equipment $15,570 depreciation ,720 10,850 Total property, plant, and equipment ,250 Total assets $261,560 Continued

17 Note payable (current portion) 5,000 Salaries payable 1,140 Liabilities Current liabilities: Accounts payable $22,420 Note payable (current portion) 5,000 Salaries payable 1,140 Unearned rent ,800 Total current liabilities $ 30,360 Long-term liabilities: Note payable (due 2017) ,000 Total liabilities $ 50,360 Owner’s Equity Chris Clark, capital ,200 Total liabilities and owner’s equity $261,560 Concluded

18 AKUNTANSI UNTUK PERSEDIAAN BARANG DAGANGANSistem Perpetual Sistem Periodik Dibuat account Persediaan BD yang mengikuti perubahan barang di gudang Account Persediaan BD hanya berubah pada akhir periode Persediaan BD 500 1,000 5,000

19 Periodic vs. Perpetual Methods of AccountingPeriodic Method COGS dan Persed Barang (Inventory) dihitung pada setiap Akhir Periode Buku Besar Persediaan Barang (Inventory) tidak memperlihatkan saldo yang sebenarnya setiap saat

20 Sistem Periodik Saat beli, harga beli persediaan dicatat di rekening “Pembelian/Purchase”” Pada waktu menjual harga pokok barang yang dijual tidak dicatat dalam akuntansi Catatan mengenai persediaan tak sesuai dengan persediaan yang ada di gudang, oleh karena itu perlu penyesuaian setiap akhir periode

21 Sistem Periodik Menghasilkan Informasi besarnya nilai kegiatanPurchase/Pembelian Pembelian BD xx Retur Pembelian/Purchase Return Retur Pembelian xx Puchase Discount Diskon Pembelian xx Transportation- In Ongkos Angkut Pembelian xx

22 Periodic vs. Perpetual Methods of AccountingSetiap transaksi yang mempengaruhi persediaan BD akan dicatat dalam perkiraan Persediaan BD Jumlah COGS dan Barang tersedia dijual akan selalu terlihat dalam catatan

23 SISTEM PERPETUAL Analisis atas transaksi melihat arus persediaanMembeli barang dagangan tunai $5,000 Bagaimana Pengaruhnya ? Persediaan BD/ Merchandise Inventory 500 5,000 1. Persediaan Bertambah $5,000 2. Kas Berkurang $5,000 Kas 5,000

24 Ongkos Angkut PembelianSistem Perpetual Setiap transaksi yang mempengaruhi Persediaan BD dicatat ke Perkiraan Persediaan BD Merchandise Inventory Pembelian BD xx xx xx Retur Pembelian xx Diskon Pembelian Ongkos Angkut Pembelian

25 Sales Transactions

26 On January 3, a firm sold $1,800 of merchandise for cash.Cash Sales JOURNAL PAGE 26 Post. Ref. Description Dr Cr. Date 2007 1 Jan. 3 Cash 2 Sales To record cash sales. 3 4 5 On January 3, a firm sold $1,800 of merchandise for cash.

27 Cash Sales 6 3 Cost of Merchandise Sold 7 Merchandise Inventory 8 To record the cost of merchandise sold. 9 10 Using a perpetual inventory, the inventory cost of $1,280 must be recorded.

28 Cash Sales JOURNAL PAGE 28 Post. Ref. Description Dr Cr. Date 2007 1 Jan. 31 Credit Card Expense 2 Cash 3 To record service charges on credit card sales for the month. 4 5 Credit card sales (MasterCard or Visa) are recorded as cash sales. At the end of the month, $48 was sent to cover this service charge.

29 Sales on Account Jan. 12 Accounts Receivable—Sims Co Sales Invoice No 12 Cost of Merchandise Sold Merchandise Inventory Cost of merchandise sold on Invoice No On January 12, a firm sold Sims Company merchandise on account, $510. The cost of the merchandise to the seller was $280.

30 Sales Discounts The terms for when payments for merchandise are to be made are called credit terms. If buyer is allowed an amount of time to pay, it is known as the credit period.

31 Sales Discounts Credit TermsInvoice for $1,500 Terms: 2/10, n/30 If invoice is paid within 10 days of invoice date $1,470 paid (less 2% as a cash discount)

32 If invoice is NOT paid within 10 days of invoice dateSales Discounts Credit Terms If invoice is NOT paid within 10 days of invoice date Invoice for $1,500 Terms: 2/10, n/30 $1,500 PAID

33 2/10,n30 Desember 2 Tak Dapat discount Dapat discount Tgl jual beli 34 5 6 7 8 9 10 11 12 13 14 Tak Dapat discount Dapat discount Tgl jual beli

34 Sales Discounts Jan. 21 Cash Sales Discounts Accounts Receivable—Sims Co Collection of Invoice No. 7172, less discount. On January 21, the firm receives the amount due from Sims (refer to Slide 25), less the 2 percent discount.

35 Sales Returns and AllowancesBarang yang dikembalikan kepada supplier disebut sales return. If there is a defect in the product or the wrong item was shipped, the seller may reduce the initial price at which the goods were sold. This is known as a sales allowance.

36 Sales Returns and AllowancesJan. 13 Sales Returns and Allowances Accounts Receivable—Krier Co Credit Memo No. 32. 13 Merchandise Inventory Cost of Merchandise Sold Cost of merchandise returned—Credit Memo 32. On January 13, issued Credit Memo 32 to Krier Company for merchandise returned to NetSolutions. Selling price, $225; cost to NetSolutions, $140.

37 Purchase Transactions

38 Purchase TransactionsPost. Ref. Description Dr Cr. Date 2007 1 Jan. 3 Merchandise Inventory 2 Cash Purchased inventory from Bowen Co. 3 4 5 On January 3, Purchased merchandise for cash from Bowen Company, $2,510.

39 What’s the last day the invoice can be paid?Purchase Discounts What’s the last day the invoice can be paid? Alpha Technologies issues an invoice for $3,000 to NetSolutions dated March 12, with terms 2/10, n/30.

40 Purchase Discounts The full amount is due on April 11.Let’s do a simple calculation. Invoice period 30 Days in March 31 Date of invoice 12 Remaining days 19 April 11

41 Purchase Discounts We can borrow at an annual interest rate of 6%. Should we borrow to pay the invoice within the discount period? $60 discount (2% x $3,000)?

42 Let’s see… Interest on the amount due of $3,000 less the 2 percent…Purchase Discounts Let’s see… Interest on the amount due of $3,000 less the 2 percent… Discount $60.00 Interest for 20 days at the rate of 6% on $2,940 –9.80 Savings from borrowing $50.20

43 Purchase Discounts Looks like we should take advantage of the discount even if we have to borrow the money. Discount $60.00 Interest for 20 days at the rate of 6% on $2,940 –9.80 Savings from borrowing $50.20

44 Purchase Discounts JOURNAL PAGE 27 Post. Ref. Description Dr Cr. Date 2007 1 Mar. 12 Merchandise Inventory 2 Accounts Payable—Alpha Technologies 3 4 5 On March 12, NetSolutions purchased merchandise on account from Alpha Technologies, $3,000.

45 Purchase Discounts JOURNAL PAGE 27 Post. Ref. Description Dr Cr. Date 2007 1 Mar. 22 Accounts Payable—Alpha Technol Cash Merchandise Inventory 2 3 4 5 If payment is made by March 22 NetSolutions records the discount as a reduction in cost.

46 Purchase Discounts JOURNAL PAGE 27 Post. Ref. Description Dr Cr. Date 2007 1 Apr. 11 Accounts Payable—Alpha Technol Cash 2 3 4 5 If NetSolutions does not pay the invoice until April 11, it would pay the full amount.

47 Purchases Returns and AllowancesA purchases return involves actually returning merchandise that is damaged or does not meet the specifications of the order. When the defective or incorrect merchandise is kept by the buyer and the vendor makes a price adjustment, this is a purchases allowance.

48 Purchases Returns and AllowancesAnda mengirim barang yang tidak sesuai pesanan. Bersama ini kami kirimkan Debit memo berkaitan dengan pengembalian brg tsb. NetSolutions received the delivery from Maxim Systems and determined that $900 of the items were not the merchandise ordered. Debit memorandum #18 is issued to Maxim Systems.

49 Purchases Returns and AllowancesMar. 7 Accounts Payable—Maxim Systems Merchandise Inventory Debit Memo No. 18

50 Purchases Returns and AllowancesOn May 2, NetSolutions purchased $5,000 of merchandise from Delta Data Link, subject to terms 2/10, n/30. May 2 Merchandise Inventory Purchased merchandise. Accounts Payable—Delta Data

51 Purchases Returns and AllowancesOn May 4, NetSolutions returns $3,000 of the merchandise. May 4 Accounts Payable—Delta Data Links Returned portion of merchandise purchased. Merchandise Inventory

52 Purchases Returns and AllowancesOn May 12, NetSolutions pays the amount due. May 12 Accounts Payable—Delta Data Links Paid invoice. Cash Merchandise Inventory ($5,000 – $3,000) x 2%

53 Transportation Costs

54 Hak milik berpindah saat barang dikirimFOB Shipping Point Pembeli menanggung ongkos angkut dan akan dicatat pada akun Merchandise Inventory Fruit Express Hak milik berpindah saat barang dikirim

55 FOB Shipping Point June 10 Merchandise Inventory Accounts Payable—Magna Data Purchased merchandise, terms FOB shipping point. 10 Merchandise Inventory Cash Paid shipping cost . On June 10, NetSolutions buys merchandise from Magna Data on account, $900, terms FOB shipping point and pays the transportation cost of $50.

56 Hak milik berpindah saat barang sampai di gudang pembeliFOB Destination Penjual menanggung ongkos angkut dan dicatat pada akun Transportation Out Fruit Express Hak milik berpindah saat barang sampai di gudang pembeli

57 NetSolutions pays the transportation cost of $40.FOB Destination June 15 Accounts Receivable—Kranz Co Sales Sold merchandise, terms FOB destination. 15 Cost of Merchandise Sold Merchandise Inventory Cost of sale of Kranz Co . On June 15, NetSolutions menjual barang kpd Kranz Company secara kredit, $700, terms FOB destination. COGS = $480. NetSolutions pays the transportation cost of $40.

58 FOB Destination June 15 Transportation Out Cash Paid shipping cost on merchandise sold. On June 15, NetSolutions sells merchandise to Kranz Company on account, $700, terms FOB destination. The cost of the merchandise sold is $480. NetSolutions pays the transportation cost of $40.

59 Sales Taxes Aug. 12 Accounts Receivable—Lemon Co Sales Sales Taxes Payable Invoice No. 339 On August 12, merchandise is sold on account to Lemon Company, $100. The state has a 6% sales tax.

60 Sales Taxes Sept.15 Sales Tax Payable Cash Payment for sales taxes collected during August. On September 15, the seller sends in a payment of $2,900 to the taxing unit for the August taxes collected.

61 Illustration of Accounting for Merchandise TransactionsScully Company (Seller) Accounts Receivable—Burton Co. 7,500 Sales 7,500 Cost of Merchandise Sold 4,500 Merchandise Inventory 4,500 Burton Company (Buyer) Merchandise Inventory. 7,500 Accounts Payable—Scully Co. 7,500 July 1. Scully Company sold merchandise on account to Burton Co., $7,500, terms FOB shipping point, n/45. The cost of the merchandise sold was $4,500.

62 Illustration of Accounting for Merchandise TransactionsScully Company (Seller) No entry. Burton Company (Buyer) Merchandise Inventory 150 Cash 150 July 2. Burton Company paid transportation charges of $150 on July 1 purchase from Scully Company.

63 Illustration of Accounting for Merchandise TransactionsScully Company (Seller) Accounts Receivable—Burton Co. 5,000 Sales 5,000 Cost of Merchandise Sold 3,500 Merchandise Inventory 3,500 Burton Company (Buyer) Merchandise Inventory. 5,000 Accounts Payable—Scully Co. 5,000 July 5. Scully Company sold merchandise on account to Burton Co., $5,000, terms FOB Destination, n/30. The cost of the merchandise sold was $3,500.

64 Illustration of Accounting for Merchandise TransactionsScully Company (Seller) Transportation Out 250 Cash 250 Burton Company (Buyer) No entry. July 7. Scully Company paid transportation costs of $250 for delivery of merchandise sold to Burton Company on July 5.

65 Illustration of Accounting for Merchandise TransactionsScully Company (Seller) Sales Returns and Allowances 1,000 Accounts Receivable—Burton Co. 1,000 Merchandise Inventory 700 Cost of Merchandise Sold 700 Burton Company (Buyer) Accounts Payable—Scully Co. 1,000 Merchandise Inventory 1,000 July 13. Scully Company issued Burton Company a credit memorandum for $1,000 of merchandise returned from a July 5 purchase on account. The cost of the merchandise was $700.

66 Illustration of Accounting for Merchandise TransactionsScully Company (Seller) Cash 4,000 Accounts Receivable—Burton Co. 4,000 Burton Company (Buyer) Accounts Payable—Scully Co. 4,000 Cash 4,000 July 15. Scully Company received payment from Burton Company for purchase of July 5.

67 Illustration of Accounting for Merchandise TransactionsScully Company (Seller) Accounts Receivable—Burton Co. 12,000 Sales 12,000 Accounts Receivable—Burton Co. 500 Cash 500 Burton Company (Buyer) Merchandise Inventory 12,500 Accounts Payable—Scully Co. 12,500 July 18. Scully Company sold merchandise on account to Burton Company, $12,000, terms FOB shipping point, 2/10, n/eom. Scully prepaid transportation costs of $500, which were added to the invoice. The cost of the merchandise sold was $7,200.

68 Illustration of Accounting for Merchandise TransactionsContinued (Seller) Cost of Merchandise Sold 7,200 Merchandise Inventory 7,200 Burton Company (Buyer) July 18. Scully Company sold merchandise on account to Burton Company, $12,000, terms FOB shipping point, 2/10, n/eom. Scully prepaid transportation costs of $500, which were added to the invoice. The cost of the merchandise sold was $7,200.

69 Illustration of Accounting for Merchandise TransactionsScully Company (Seller) Cash 12,260 Sales Discounts 240 Accounts Receivable—Burton Co. 12,500 Burton Company (Buyer) Accounts Payable—Scully Co. 12,500 Merchandise Inventory 240 Cash 12,260 July 28. Scully Company received payment from Burton Company for purchase of July 18, less discount (2% x $12,000).

70 Statement of Financial Position AccountsNetSolutions Chart of Accounts Statement of Financial Position Accounts 200 Liabilities 210 Accounts Payable 211 Salaries Payable 212 Unearned Rent 215 Notes Payable 300 Owner’s Equity 310 Chris Clark, Capital 311 Chris Clark, Drawing 312 Income Summary 100 Assets 110 Cash 112 Accounts Receivable 115 Merchandise Inventory 116 Office Supplies 117 Prepaid Insurance 120 Land 123 Store Equipment 124 Accumulated Depreciation— Store Equipment 125 Office Equipment 126 Accumulated Depreciation— Office Equipment

71 Income Statement AccountsNetSolutions Chart of Accounts Income Statement Accounts 500 Costs and Expenses 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense— Store Equipment 523 Transportation Out 529 Miscellaneous Selling Expense 530 Office Salaries Expense 531 Rent Expense 532 Depreciation Expense— Office Equipment 533 Insurance Expense 534 Office Supplies Expense 539 Miscellaneous Admin. Expense 400 Revenues 410 Sales 411 Sales Returns and Allowances 412 Sales Discounts 600 Other Income 610 Rent Revenue 700 Other Expense 710 Interest Expense

72 Merchandise Inventory ShrinkageTimbulnya suatu perbedaan antara saldo menurut catatan perusahaan dan saldo aktual persediaan yang ada di gudang

73 Merchandise Inventory ShrinkageSaldo persediaan December 31, 2007 menurut buku besar $63,950. Hasil perhitungan fisik persediaan di gudang adalah $62,150 Perlu Adjustment

74 Merchandise Inventory ShrinkageAdjusting Entry Dec. 31 Cost of Merchandise Sold Merchandise Inventory Inventory records $63,950 Inventory count 62,150 Inventory shortage $ 1,800

75 Profitability Measures -- Effective Use of AssetsRatio of Net Sales to Assets Sears Penney Net sales $41,366,000 $31,846,000 Total assets: Beginning of year $50,409,000 $19,742,000 End of year $44,317,000 $20,908,000 Average $47,363,000 $20,325,000 Ratio of net sales to assets .87 to to 1 Ratio Use: To assess the effectiveness in the use of assets to generate sales.

76 Chapter 6 The End