Ch06 accounting for merchandising businesses

Prepared by: C. Douglas Cloud

Professor Emeritus of

Accounting

Pepperdine University

© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Student Version

Accounting for Merchandising Businesses

Chapter 6

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These slides should be viewed using the presentation

mode (click the icon to start presentation).

© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Learning Objective 1

Distinguish between the activities and

financial statements of service and

merchandising businesses.

© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LO 1

Nature of Merchandising Businesses

Most service businesses, such as plumbing

repair and accounting services, have no

merchandise.

Merchandising businesses, such as a

department store or sandwich shop, generate

revenue by selling a product.

Merchandise on hand (not sold) at the end of

an accounting period is called merchandise

inventory.

© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Learning Objective 2

Distinguish between the activities and

financial statements of service and

merchandising businesses.

Describe and illustrate the financial

statements of a merchandising business.

© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LO 2

Multiple-Step Income Statement

The multiple-step income statement contains

several sections, subsections, and subtotals.

The first segment reports revenue from

sales.

© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LO 2

Sales is the total amount charged customers for

merchandise sold, including cash sales and sales

on account.

 Sales returns and allowances are granted by the

seller to customers for damaged or defective

merchandise.

 Sales discounts are granted by the seller to

customers for early payment of amounts owed.

 Net sales is determined by subtracting sales returns

and allowances and sales discounts from sales.

Multiple-Step Income Statement