note 005 Financial Accounting of Sole Trader Financial account 财务会计 教学文稿.ppt

Liana Mohamad FA1 Financial Accounting of Sole Trader Topic 5 Merchandising Activities Service organizations sell time to earn revenue. Examples: accounting firms, law firms, and plumbing services Revenues Expenses Minus Netincome Equals Manufacturer Wholesaler Retailer Customer Merchandising Companies Merchandising Activities Reporting Income for a Merchandiser Merchandising companies sell products to earn revenue. Examples: sporting goods, clothing, and auto parts stores Cost ofGoods Sold GrossProfit Expenses NetIncome NetSales Minus Equals Minus Equals Operating Cycle for a Merchandiser Begins with the purchase of merchandise and ends with the collection of cash from the sale of merchandise. Purchases Merchandiseinventory Credit sales Accountreceivable Cashcollection Purchases Merchandiseinventory Cashsales Cash Sale Credit Sale 2/10,n/30 Purchase Discounts Discount Percent Number of Days Discount Is Available Otherwise, Net (or All) Is Due CreditPeriod Purchase Discounts A deduction from the invoice price granted to induce early payment of the amount due. Terms Time Due Discount Period Full amount less discount Credit Period Full amount due Purchase or Sale Purchase Returns and Allowances Purchase Return . . . Merchandise returned by the purchaser to the supplier. Purchase Allowance . . . A reduction in the cost of defective merchandise received by a purchaser from a supplier. Transportation Costs FOB shipping point (buyer pays) FOB destination (seller pays) Merchandise Seller Buyer Itemized Cost of Merchandise Purchased Accounting for Merchandise Sales Value of Ending Inventories Perpetual system - the inventory account is updated for any changes in the stock balance. The inventory amount at any point of time could be determined directly from the books of the enterprise. Periodic system - the inventory account is only updated periodically after a stock count has been undertaken. The inventory amount at any point in time cannot be determin