Textbook Notes (368,192)
Canada (161,707)
Accounting (248)
ACCT 2220 (54)
m (7)
Chapter 5

ACCT NOTES - Chapter #5

3 Pages
Unlock Document

ACCT 2220

Chapter 5: Merchandising Operations Difference between Service and Merchandising Companies - Service companies perform services as their primary source of revenue (ex: accounting firm, law office) - Merchandising companies buy and sell merchandise (ex: Wal-Mart) Merchandising Company Revenues and Expenses - Revenue: Sales revenue (ex: from the sales of merchandise), Other Revenue (ex: interest, rent) - Expenses are divided into categories: cost of goods sold, operating expenses and income tax expense. Inventory Systems - Merchandising companies may use either (or both) of the fallowing inventory systems to determine their cost of goods sold and ending inventory: Perpetual or Periodic Perpetual Systems: - Inventory is updated constantly for purchases and sales - A physical count is done at least once a year to adjust perpetual records to actual. - This system enables the effective control inventory, which is an important asset. Periodic System: - This type of inventory system does not keep an updated record of all goods bought, sold and on hand. - Cost of goods sold is only determined at the end of the accounting period once inventory is counted. Perpetual Inventory System – Purchase of Merchandise - Purchase (includes all costs to get merchandise to place of business and ready for resale) - Purchase returns and allowances - Purchase Discounts - Freight (Purchases) – (purchase returns and allowances) – (purchase discounts) = (Net Purchases) + (Freight) = (Cost of Goods Sold) Freight: - Freight paid by the buyer is part of the cost of the merchandise purchased. - FOB (free on board) – this is
More Less

Related notes for ACCT 2220

Log In


Join OneClass

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

Sign up

Join to view


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.