lecture 5 and 6.docx

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Department
Financial Accounting
Course
MGAB03H3
Professor
Mark Fitzpatrick
Semester
Winter

Description
Merchandising OperationsSales are the result of the sale of merchandiseCost of Goods Sold is the cost of merchandise sold during a periodGross ProfitSalesCOGSNet income is then determined by subtracting operating expenses from gross profitMerchandising operations often have a longer operating cycle because there are more steps required to produce revenue than a service business Perpetual Inventory SystemDetailed records of every purchasesale is keptContinuously shows the quantity and cost of inventory on hand sold or purchasedAt the time of a sale COGS and merchandise inventory are changed to reflect the sale along with the regular entry of CashAccounts Receivable and SalesProvides strong internal controlAmounts in the books should reflect what is physically on hand at all timesPhysical inventory should still be done at least once a yearAllows for knowledge of merchandise availabilities in stores Periodic Inventory SystemRecords of inventory on hand are not kept updated throughout the periodCost of Goods SoldBeginning InventoryCost of Goods PurchasedPurchasesEnding InventoryDoes not provide consistently uptodate records of inventory PurchasesNeeds to be supported by documentationPurchase invoices and cash receipts suffice as documentationMerchandise Inventory is only for purchases made for resaleMerchandise Inventory is a subsidiary ledger control account Sales TaxesGST imposed on purchases can be offset by the GST collected from customersPST is not imposed on purchases with the intent to resell merchandisePST is only paid for by the final customer
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