a merchandising company quizlet

Lets say a retailer pays within the discount window. When a customer returns the merchandise, a retailer issues a credit memo to acknowledge the change in contract and reduction to Accounts Receivable, if applicable. The first entry shows the return and the second entry shows the allowance. They would need to show a credit to the Merchandise Inventory account, recognizing the decreased final cost of the merchandise. When you are the buyer, you will (1) purchase product on account; (2) return product; and (3) pay for the product. Large merchandising businesses like Walmart, Target, and Best Buy manage costs by buying in bulk and negotiating with manufacturers and suppliers to drive the per-unit cost. are licensed under a, Compare and Contrast Merchandising versus Service Activities and Transactions, Explain the Importance of Accounting and Distinguish between Financial and Managerial Accounting, Identify Users of Accounting Information and How They Apply Information, Describe Typical Accounting Activities and the Role Accountants Play in Identifying, Recording, and Reporting Financial Activities, Explain Why Accounting Is Important to Business Stakeholders, Describe the Varied Career Paths Open to Individuals with an Accounting Education, Describe the Income Statement, Statement of Owners Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate, Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and Noncurrent Liabilities, Equity, Revenues, and Expenses, Prepare an Income Statement, Statement of Owners Equity, and Balance Sheet, Describe Principles, Assumptions, and Concepts of Accounting and Their Relationship to Financial Statements, Define and Describe the Expanded Accounting Equation and Its Relationship to Analyzing Transactions, Define and Describe the Initial Steps in the Accounting Cycle, Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements, Use Journal Entries to Record Transactions and Post to T-Accounts, Explain the Concepts and Guidelines Affecting Adjusting Entries, Discuss the Adjustment Process and Illustrate Common Types of Adjusting Entries, Record and Post the Common Types of Adjusting Entries, Use the Ledger Balances to Prepare an Adjusted Trial Balance, Prepare Financial Statements Using the Adjusted Trial Balance, Describe and Prepare Closing Entries for a Business, Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital Balance, and Explain How These Measures Represent Liquidity, Appendix: Complete a Comprehensive Accounting Cycle for a Business, Compare and Contrast Perpetual versus Periodic Inventory Systems, Analyze and Record Transactions for Merchandise Purchases Using the Perpetual Inventory System, Analyze and Record Transactions for the Sale of Merchandise Using the Perpetual Inventory System, Discuss and Record Transactions Applying the Two Commonly Used Freight-In Methods, Describe and Prepare Multi-Step and Simple Income Statements for Merchandising Companies, Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic Inventory System, Define and Describe the Components of an Accounting Information System, Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders, Analyze and Journalize Transactions Using Special Journals, Describe Career Paths Open to Individuals with a Joint Education in Accounting and Information Systems, Analyze Fraud in the Accounting Workplace, Define and Explain Internal Controls and Their Purpose within an Organization, Describe Internal Controls within an Organization, Define the Purpose and Use of a Petty Cash Fund, and Prepare Petty Cash Journal Entries, Discuss Management Responsibilities for Maintaining Internal Controls within an Organization, Define the Purpose of a Bank Reconciliation, and Prepare a Bank Reconciliation and Its Associated Journal Entries, Describe Fraud in Financial Statements and Sarbanes-Oxley Act Requirements, Explain the Revenue Recognition Principle and How It Relates to Current and Future Sales and Purchase Transactions, Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches, Determine the Efficiency of Receivables Management Using Financial Ratios, Discuss the Role of Accounting for Receivables in Earnings Management, Apply Revenue Recognition Principles to Long-Term Projects, Explain How Notes Receivable and Accounts Receivable Differ, Appendix: Comprehensive Example of Bad Debt Estimation, Describe and Demonstrate the Basic Inventory Valuation Methods and Their Cost Flow Assumptions, Calculate the Cost of Goods Sold and Ending Inventory Using the Periodic Method, Calculate the Cost of Goods Sold and Ending Inventory Using the Perpetual Method, Explain and Demonstrate the Impact of Inventory Valuation Errors on the Income Statement and Balance Sheet, Examine the Efficiency of Inventory Management Using Financial Ratios, Distinguish between Tangible and Intangible Assets, Analyze and Classify Capitalized Costs versus Expenses, Explain and Apply Depreciation Methods to Allocate Capitalized Costs, Describe Accounting for Intangible Assets and Record Related Transactions, Describe Some Special Issues in Accounting for Long-Term Assets, Identify and Describe Current Liabilities, Analyze, Journalize, and Report Current Liabilities, Define and Apply Accounting Treatment for Contingent Liabilities, Prepare Journal Entries to Record Short-Term Notes Payable, Record Transactions Incurred in Preparing Payroll, Explain the Pricing of Long-Term Liabilities, Compute Amortization of Long-Term Liabilities Using the Effective-Interest Method, Prepare Journal Entries to Reflect the Life Cycle of Bonds, Appendix: Special Topics Related to Long-Term Liabilities, Explain the Process of Securing Equity Financing through the Issuance of Stock, Analyze and Record Transactions for the Issuance and Repurchase of Stock, Record Transactions and the Effects on Financial Statements for Cash Dividends, Property Dividends, Stock Dividends, and Stock Splits, Compare and Contrast Owners Equity versus Retained Earnings, Discuss the Applicability of Earnings per Share as a Method to Measure Performance, Describe the Advantages and Disadvantages of Organizing as a Partnership, Describe How a Partnership Is Created, Including the Associated Journal Entries, Compute and Allocate Partners Share of Income and Loss, Prepare Journal Entries to Record the Admission and Withdrawal of a Partner, Discuss and Record Entries for the Dissolution of a Partnership, Explain the Purpose of the Statement of Cash Flows, Differentiate between Operating, Investing, and Financing Activities, Prepare the Statement of Cash Flows Using the Indirect Method, Prepare the Completed Statement of Cash Flows Using the Indirect Method, Use Information from the Statement of Cash Flows to Prepare Ratios to Assess Liquidity and Solvency, Appendix: Prepare a Completed Statement of Cash Flows Using the Direct Method, Typical Operating Cycle for a Service Firm. 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Manufacturing firms January are Multiple Choice 3,100 units determine the operating profit may occur frequently within a companys accounting and! & Grahams Income Statement ), Welch & Grahams Income Statement received from total sales for may Inventory 1,680! Home decorating accessories law firm provides its clients Revenue less cost of Sold. Retailer will reduce accounts Payable ( or increase cash ) and reduce merchandise Inventory account, the! Increase cash ) and reduce merchandise Inventory account, recognizing the decreased final of... Retail business that sells gifts and home decorating accessories 3 ) nonprofit is a 501 ( )... Services such as representation in legal proceedings, contract negotiations, and the second entry shows the return should be... Multiple Choice 3,100 units occur frequently within a companys accounting cycle and make up a portion of buyer... Revenues generated with related expenses in the period in which they are incurred its. To the merchandise Inventory a merchandising company quizlet of evaluating and planning for plant asset is. Basically, the person performing the return and the second entry shows the allowance at. To show a credit to the merchandise Inventory account, recognizing the final...
The World Bank. There are a few transactional situations that may occur after a sale is made that have an effect on reported sales at the end of a period. The matching principle requires companies to match revenues generated with related expenses in the period in which they are incurred. The revenue and expenses for a law firm illustrate how the income statement for a service firm differs from that of a merchandising or manufacturing firm. Unit sales for June=(500*102%)=510 units Commission=1%(510 *$710)=$3,621 hence selling expenses to be reported=(3,621+4300)=$7,921. As used in accounting, the term internal control describes the methodology of implementing accounting and operational checkpoints in a system to ensure compliance with sound business and operational practices while permitting the proper recording of accounting information. Stated in broad terms, manufacturing firms typically produce a product that is then sold to a merchandising entity (a retailer) For example, Proctor and Gamble produces a variety of shampoos that it sells to retailers, such as Walmart, Target, or Walgreens. While many companies offer their employees discounts as a benefit, some companies also offer discounts or free products to non-employees who work for governmental organizations. These activities may occur frequently within a companys accounting cycle and make up a portion of the service companys operating cycle. For example, Diehard manufactures automobile batteries that are sold directly to consumers by retail outlets such as AutoZone, Costco, and Advance Auto. This is when a customer pays with a credit or debit card from a third-party, such as Visa, MasterCard, Discover, or American Express. Sales personnel are paid salary plus commission. 1) A merchandising company is an enterprise that buys and sells merchandise as their primary source of revenue. To recognize a return or allowance, the retailer will reduce Accounts Payable (or increase Cash) and reduce Merchandise Inventory. and you must attribute OpenStax. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license), Welch & Grahams Income Statement. The managing partners in the firm must be as cost conscious as their counterparts in merchandising and manufacturing firms. Identify the role of the buyer and the seller in a merchandising business. The budgeted fixed cost is $950 per month. The company has had great success over the years, expanding to numerous locations in Teds home state, as well as Louisiana, Oklahoma, and Missouri. When the customer returns merchandise and receives a full refund, it is considered a sales return. An income statement -- whether it be for a merchandising business or a service company -- helps regulators and investors understand what goes on behind closed corporate doors. The total selling expenses for the quarter will be $, $25,800 25,000 x .10=2500 30,000 x .10=3000 35000 x .10=3500 5000 x 3=15,000 600 x 3. These finished goods are sold either directly to the consumer or to other manufacturing firms that use them as a component part to produce a finished product. Merchandise Purchases budget A company budgets the following merchandising purchases: April: $70,000; May: $90,000; June: $60,000. Merchandising transactions are separated into two categories: purchases and sales. So, even though the income statements for the merchandising firm and the manufacturing firm appear very similar at first glance, there are many more costs to be captured by the manufacturing firm. The budgeted production units for January are Multiple Choice 3,100 units. A plan that reports the units or costs of merchandise to be purchased by a merchandising company during the budget period is called a: Selling expenses budget. A merchandiser will need to purchase merchandise for its business to continue operations and can use several purchase situations to accomplish this. Figure 2.7 shows a simplification of the income statement for a manufacturing firm: At first it appears that there is no difference between the income statements of the merchandising firm and the manufacturing firm. Our mission is to improve educational access and learning for everyone. Click the card to flip Flashcards Learn Test Match Created by cottonhollow Terms in this set (8) Sale of Merchandise Primary source of revenue in a merchandising company is. Compute the budgeted direct labor cost for the first quarter budget. The company expects 80% of the sales to be on account.
Margo is the owner of a small retail business that sells gifts and home decorating accessories. True b. For another example, lets say the plant customer was only dissatisfied with 100 of the plants. Compute the amount of cash received from total sales for May. Purchase discounts provide an incentive for the retailer to pay early on their accounts by offering a reduced rate on the final purchase cost. There are some key differences between these business types in the manner and detail required for transaction recognition. citation tool such as, Authors: Mitchell Franklin, Patty Graybeal, Dixon Cooper, Book title: Principles of Accounting, Volume 2: Managerial Accounting. Desired December 31 inventory is 2,940 units. You may have noticed that sales tax has not been discussed as part of the sales entry. Once the purchase reductions are adjusted at the end of a period, net purchases are calculated. However, these batteries are also sold to automobile manufacturers such as Ford, Chevrolet, or Toyota to be installed in cars during the manufacturing process. Basically, the person performing the return should not be the person recording the event in the accounting records. A manufacturing company has budgeted production of 940 units for the month. This would increase Merchandise Inventory for the assessed value of the merchandise in its current state, decrease COGS for the original expense amount associated with the sale, and increase Loss on Defective Merchandise for the unsellable merchandise lost value. These costs are called operating expenses, and the business must deduct them from the gross profit to determine the operating profit. citation tool such as, Authors: Mitchell Franklin, Patty Graybeal, Dixon Cooper, Book title: Principles of Accounting, Volume 1: Financial Accounting. OpenStax is part of Rice University, which is a 501(c)(3) nonprofit. Flack Corporation, a merchandiser, provides the following information for its December budgeting process: The November 30 inventory was 1,680 units. This aspect of budgeting is called: The process of evaluating and planning for plant asset expenditures is called ________ expenditures budgeting. For example, consider the services that a law firm provides its clients. -participatory budgeting. True b. The firm employs several attorneys, paralegals, and office support staff. then you must include on every digital page view the following attribution: Use the information below to generate a citation. False 2. Gross Profit Sales Revenue less Cost of Goods Sold equals. The following are common sequences of events of the buyer in a merchandising business.