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    BBFA1103 Topic 6 Accounting For Merchandising Operations

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    knea9999
    The document discusses accounting for merchandising operations. It explains key merchandising transactions like purchases, sales, discounts, returns and allowances. It also discusses accounting entries for these transactions and preparation of financial statements for merchandisers.

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    BBFA1103 Topic 6 Accounting For Merchandising Operations

    Uploaded by

    knea9999
    9 views26 pages
    The document discusses accounting for merchandising operations. It explains key merchandising transactions like purchases, sales, discounts, returns and allowances. It also discusses accounting entries for these transactions and preparation of financial statements for merchandisers.

    Original Title

    BBFA1103 Topic 6 Accounting for Merchandising Operations

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    The document discusses accounting for merchandising operations. It explains key merchandising transactions like purchases, sales, discounts, returns and allowances. It also discusses accounting entries for these transactions and preparation of financial statements for merchandisers.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    9 views26 pages

    BBFA1103 Topic 6 Accounting For Merchandising Operations

    Uploaded by

    knea9999
    The document discusses accounting for merchandising operations. It explains key merchandising transactions like purchases, sales, discounts, returns and allowances. It also discusses accounting entries for these transactions and preparation of financial statements for merchandisers.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 26

    BBFA1103

    INTRODUCTORY ACCOUNTING

    TOPIC 6 ACCOUNTING FOR MERCHANDISING OPERATIONS


    LEARNING OUTCOMES
    By the end of this topic, you should be able to:
    1. Explain the difference between services and
    merchandising operations;
    2. Journalise and post transactions of a merchandiser;
    3. Calculate net sales, net purchase, cost of goods sold,
    gross profit and net income of a merchandiser;
    4. Prepare the income statement and the balance sheet of
    a merchandiser; and
    5. Prepare closing entries of a merchandiser.
    6.1 MERCHANDISING
    (RETAILING/TRADING)
    Service vs Merchandising Company
    Operating Cycle for a Trader

    Cash Sale Credit Sale

    Cash
    Purchases collection Purchases

    Merchandise
    Cash Account
    inventory
    sales receivable

    Merchandise
    inventory Credit sales
    Important Transactions

    Purchases Sales Discounts

    Return and Transportation


    Allowances cost
    6.2 ACCOUNTING FOR
    MERCHANDISNG PURCHASES

    Purchase of Goods

    Dr Purchases
    Cr Cash/ Accounts Payable
    Trade Discounts
    Used by manufacturers and wholesalers to offer better
    prices for greater quantities purchased.

    Quantity sold 1,000


    Example Price per unit (RM) 5.25
    Megah Sdn. Bhd. offers a 30% trade Total 5,250
    discount on orders of 1,000 Less 30% discount (1,575)
    units or more of their popular Invoice price 3,675
    product Racer. Each
    Racer has a list price of RM5.25.
    Purchase Discounts (Discount Received)
    Purchase Discounts

    2/10,n/30
    Number of
    Days Otherwise,
    Discount Discount Is Net (or All) Credit
    Percent Available Is Due Period
    Purchase Discounts

    A deduction from the invoice price granted to induce early


    payment of the amount due.

    Terms

    Time Discount Period Credit Period

    Due
    Full amount Full amount due
    less discount

    Purchase or Sale
    Purchase Returns and Allowance

    Dr Cash/ Accounts Payable


    Cr PRA
    6.3 ACCOUNTING FOR
    MERCHANDISNG SALES

    Sales of Goods
    Dr Cash/ Accounts Receivable
    Cr Sales
    Sales Discounts (Discount Allowed)

    The terms for when payments for


    merchandise are to be made are
    called credit terms.

    If buyer is allowed an
    amount of time to pay, it is
    known as the credit period.
    Sales Discount
    Credit Terms
    Invoice for
    If invoice is
    RM1,500
    paid within 10
    Terms:
    days of
    2/10, n/30
    invoice date

    RM1,470 paid
    (less 2% as a
    cash discount)
    Sales Discount

    Credit Terms
    If invoice is
    NOT paid
    Invoice for
    within 10
    RM1,500 Cash Discounts
    days of
    Terms:
    invoice date
    2/10, n/30

    RM1,500 PAID
    Sales Return and
    Allowance(Return Inward)
    Merchandise that is returned to the
    vendor is referred to as a sales
    return.
    If there is a defect in the product or
    the wrong item was shipped, the
    seller may reduce the initial price at
    which the goods were sold. This is
    known as a sales allowance.
    Transportation Costs

    Transportation
    Costs
    Transportation Costs
    • The terms of a sale should
    indicate when the
    ownership of the
    merchandise passes to the
    buyer.
    • This point determines
    which party, the buyer or
    the seller must pay the
    transportation costs.
    Free On Board (FOB)
    Shipping Point
    Buyer pays freight costs

    Fruit
    Express

    A shipping term that means that the buyer is


    responsible for all freight costs while the
    goods are in transit.
    FOB Destination
    Seller pays freight costs

    Fruit
    Express

    A shipping term that means that the seller is


    responsible for all freight costs until the
    goods reach their destination.

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