Category Archive for: Accounting for Merchandising Activities

EVALUATING THE PERFORMANCE OF A MERCHANDISING COMPANY

In evaluating the performance of a merchandising business, managers and investors look at more than just net income. Two key measures of past performance and future prospects . are trends in the company’s net sales and gross profit Net Sales Most investors and business managers consider the trend in net sales to be a key i dicator of…

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TRANSACTIONS RELATING TO PURCHASES

In addition to the basic transactions illustrated and explained in this chapter, merchandising companies must account for a variety of additional transactions relating to purchases of merchandise. Examples include discounts offered for prompt payment, merchandise returns, and transportation costs. In our discussion of these transactions, we assume the use of a perpetual inventory system Credit Terms and Cash Discounts…

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NrODIFYING AN ACCOUNTING SYSTEM

Throughout this textbook we illustrate the effects of many transactions using the format of a two-column general journal. This format is ideal for textbook illustrations, as it all lows us to concisely show the effects of any type of business transactions But while general journal entries are useful for our purposes, they are not the most efficient…

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PERIODIC INVENTORY SYSTEMS

A periodic inventory system is an alternative to a perpetual inventory system. In ,a periodic inventory system, no effort is made to keep up-to-date records of either the inventory or the cost of goods sold. Instead, these amounts are determined only periodically usually at the end of each year. Operation of a Periodic Inventory System The foundation of…

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Accounting for Merchandising Activities

1. Describe the operating cycle of a merchandising Company, 2. Define subsidiary ledgers and explain their usefulness, 3. Account ‘for purchases and salesof rnerchandlse in a perpetual inventory system. 4. Explain how a.periodic inventory system operates, 5: Discuss the factors to be considered in selecting an iriventory system, 6. Define special journals and explain their usefulness, 7. Account for additional merchandising transactions related to purchases…

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