Class Notes (903,392)
CA (537,982)
Ryerson (30,332)
Accounting (780)
ACC 100 (235)
Ron Babin (3)
Lecture

Chapter 5 - Merchandising Companies.doc

19 Pages
152 Views

Department
Accounting
Course Code
ACC 100
Professor
Ron Babin

This preview shows pages 1-3. Sign up to view the full 19 pages of the document.
CHAPTER 5
RECORDING PURCHASES AND SALES
LEARNING OBJECTIVES
1. Apply the revenue recognition principle (MASTER)
2. Apply the matching principle to recognize expenses (MASTER)
3. Describe the basic format and the content of the income statement.
(UNDERSTAND)
4. Identify the differences between service and merchandising companies. (SCAN)
5. Prepare entries for purchases under a perpetual inventory system. (MASTER)
6. Prepare entries for sales under a perpetual inventory system. (MASTER)
CHAPTER OUTLINE
Learning Objective 1: Apply the revenue recognition
principle. (MASTER)
Learning Objective 2: Apply the matching principle to
recognize expenses. (MASTER)
Learning Objective 3: Describe the basic format and
the content of the income statement. (UNDERSTAND)
Read pages 204 - 210 (BEFORE NET SALES on page
210) in the textbook: Financial Accounting, The Impact on
Decision Makers, Second Canadian Edition, by Porter,
Norton, Chesley & Song-Bauld.
Learning Objective 4 - Identify the Differences
Between Service and Merchandising Companies
(SCAN)
In a merchandising company, the primary source of revenues is the sale of
merchandise, referred to as sales revenue or sales.
Unlike expenses for a service company, expenses for a merchandising company are
divided into two categories:
Cost of goods sold - the total cost of merchandise sold during the period.
Sales revenue less cost of goods sold is called gross profit.
Operating expenses - expenses that are incurred in the process of earning
sales revenues..
Gross profit less operating expenses is net earnings (or net loss).
Think of examples of service companies and merchandising companies in the local
area. Consider other examples than those used in the textbook! Consider hair salons,
banks, service stations, funeral homes, etc. as service companies. Consider
department stores, grocery stores, bookstores, etc. as merchandising companies.
The yellow pages of the phone book can be a good resource.

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.

Leah — University of Toronto

OneClass has been such a huge help in my studies at UofT especially since I am a transfer student. OneClass is the study buddy I never had before and definitely gives me the extra push to get from a B to an A!

Leah — University of Toronto
Saarim — University of Michigan

Balancing social life With academics can be difficult, that is why I'm so glad that OneClass is out there where I can find the top notes for all of my classes. Now I can be the all-star student I want to be.

Saarim — University of Michigan
Jenna — University of Wisconsin

As a college student living on a college budget, I love how easy it is to earn gift cards just by submitting my notes.

Jenna — University of Wisconsin
Anne — University of California

OneClass has allowed me to catch up with my most difficult course! #lifesaver

Anne — University of California
Description
CHAPTER 5 RECORDING PURCHASES AND SALES LEARNING OBJECTIVES 1. Apply the revenue recognition principle (MASTER) 2. Apply the matching principle to recognize expenses (MASTER) 3. Describe the basic format and the content of the income statement. (UNDERSTAND) 4. Identify the differences between service and merchandising companies. (SCAN) 5. Prepare entries for purchases under a perpetual inventory system. (MASTER) 6. Prepare entries for sales under a perpetual inventory system. (MASTER) CHAPTER OUTLINE Learning Objective 1: Apply the revenue recognition principle. (MASTER) Learning Objective 2: Apply the matching principle to recognize expenses. (MASTER) Learning Objective 3: Describe the basic format and the content of the income statement. (UNDERSTAND) Read pages 204 - 210 (BEFORE NET SALES on page 210) in the textbook: Financial Accounting, The Impact on Decision Makers, Second Canadian Edition, by Porter, Norton, Chesley & Song-Bauld. Learning Objective 4 - Identify the Differences Between Service and Merchandising Companies (SCAN) In a merchandising company, the primary source of revenues is the sale of merchandise, referred to as sales revenue or sales. Unlike expenses for a service company, expenses for a merchandising company are divided into two categories: Cost of goods sold - the total cost of merchandise sold during the period. Sales revenue less cost of goods sold is called gross profit. Operating expenses - expenses that are incurred in the process of earning sales revenues.. Gross profit less operating expenses is net earnings (or net loss). Think of examples of service companies and merchandising companies in the local area. Consider other examples than those used in the textbook! Consider hair salons, banks, service stations, funeral homes, etc. as service companies. Consider department stores, grocery stores, bookstores, etc. as merchandising companies. The yellow pages of the phone book can be a good resource. Two systems to account for inventory Perpetual Detailed records of the cost of each inventory purchase and sale are maintained. Cost of goods sold is determined each time a sale occurs. Provides better control over inventory. Periodic Detailed records are not kept throughout the period. Cost of goods sold determined only at the end of the accounting period, when a physical inventory count is taken. Think about different types of businesses that would use perpetual and periodic inventory systems. Automobile dealers and jewellers use a particular type of perpetual inventory system where they track specific items of inventory. Large retailers (grocery stores and department stores) scan merchandise when it is sold, and can easily keep track of the numbers of inventory items. The small corner store may not have the same ability, and may use a periodic inventory system. In this course you will learn only the perpetual method of recording purchases and sales. However, the difference between the two methods, as well as the benefits and drawbacks, are at the SCAN level of knowledge.
More Less
Unlock Document


Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit