Textbook Notes (381,132)
CA (168,365)
UTSC (19,305)
MGA (381)
MGAB01H3 (127)
Liang Chen (50)
Chapter

Merchandising Operations

3 Pages
113 Views

Department
Financial Accounting
Course Code
MGAB01H3
Professor
Liang Chen

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Merchandising Operations
¾ The primary source of revenues is the sale of merchandise. These revenues are
referred to as sales revenue, or simply sales
¾ Expenses for a merchandising company are divided into two categories: cost of
goods sold, and operating expenses
¾ The cost of goods sold is the total cost of merchandise sold during the period. This
expense is directly related to the revenue earned from the sale of goods. Net sales ±
Costs of goods sold = gross profit
¾ Sales revenue less cost of goods sold is called gross profit.
¾ Operating expenses are expenses that are incurred in the process of earning sales
revenue
¾ Gross profit ± operating expenses = net income (or net loss)
¾ Records of inventory are necessary
Operating cycles
¾ The operating cycle of a merchandising company is the average time from the
purchase of merchandise inventory and its eventual sale
Inventory systems
¾ There are two main inventory systems: perpetual inventory system or a periodic
inventory system
Perpetual Inventory system
¾ In a perpetual inventory system, detailed records of each inventory purchase and sale
are maintained
¾ When an item is sold, the original purchase price is obtained from the inventory
records and transferred from merchandise inventory (asset) to cost of goods sold
(expense)
¾ The cost of goods sold and reduction in inventory is recorded each time a sale occurs
Periodic inventory system
¾ The cost of goods sold is determined only at the end of an accounting period
¾ A physical inventory count is taken to determine the goods on hand at the end of the
period
¾ Cost of goods sold is calculated as follows: Beginning cost of goods + cost of goods
purchased ± Ending cost of goods on hand = Cost of goods sold
Recording Purchases of Merchandise ± Perpetual Inventory system
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Description
Merchandising Operations The primary source of revenues is the sale of merchandise. These revenues are referred to as sales revenue, or simply sales Expenses for a merchandising company are divided into two categories: cost of goods sold, and operating expenses The cost of goods sold is the total cost of merchandise sold during the period. This expense is directly related to the revenue earned from the sale of goods. Net sales Costs of goods sold = gross profit Sales revenue less cost of goods sold is called gross profit. Operating expenses are expenses that are incurred in the process of earning sales revenue Gross profit operating expenses = net income (or net loss) Records of inventory are necessary Operating cycles The operating cycle of a merchandising company is the average time from the purchase of merchandise inventory and its eventual sale Inventory systems There are two main in
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