Merchandise

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Chapter 12

• Merchandise
• Purchases and
• Accounts Payable

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Learning Objective 1
Describe merchandising activities and identify
income components for a merchandising company.
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Merchandising Activities
Merchandising Companies
Manufacturer
Wholesaler
Retailer
Customer
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Reporting Income of a Merchandiser

• Merchandising companies sell products to
  earn revenue.
• Examples sporting goods, clothing, and auto
  parts stores

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Learning Objective 2
Identify and explain the inventory asset of a
merchandising company.
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Reporting Inventory for a Merchandiser
Beginninginventory
Net cost ofpurchases

Merchandiseavailable for sale

Ending inventory
Cost of goodssold

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Learning Objective 3
Analyze and record transactions using a purchases
journal.
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Purchasing Procedures
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Purchasing Procedures
?Seller ?Invoice date ?Purchaser ?Order
number?Credit terms ?Freight terms?Goods ?Invoi
ce amount
?
?
?
?
?
?
?
?
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Accounting for Purchases and Freight Charges
Purchases Account
Transportation-In Account
Debit for Merchandise Purchases
Debit for Freight Costs
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Accounting for Purchases and Freight Charges
Z-Mart purchased 1,200 of merchandise on account
and incurred 96 of freight charges.
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Trade Discounts

• Used by manufacturers and wholesalers to
  offer better prices for greater quantities
  purchased.

Example Matrix, Inc. offers a 30 trade discount
on orders of 1,000 units or more of their
popular product Racer. Each Racer has a list
price of 5.25.
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Purchase Discounts
2/10,n/30
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Transportation Costs and Ownership Transfer
Buyer
Seller
FOB destination (seller pays)
Merchandise
FOB shipping point (buyer pays)
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Itemized Costs of Net Merchandise Purchases
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Cost of Goods Sold and Gross Profit
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Learning Objective 4
Journalize and post transactions using a
purchases journal.
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Purchases Journal
Page 2
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Purchases Journal
Page 2
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Posting to Accounts Payable Subsidiary Journal
Page 2
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Learning Objective 5
Prepare and prove the accuracy of an accounts
payable subsidiary ledger.
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Proving the Ledger
Accounts Payable Subsidiary Ledger
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Cash Disbursements JournalPeriodic System
Page 2
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Cash Disbursements JournalPeriodic System
Page 2
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Learning Objective 6
Compare the gross margin ratio and explain its
use to assess profitability.
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Gross Margin Ratio
Percentage of dollar sales available to cover
expenses and provide a profit.
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End of Chapter 12