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Contrast Periodic And Perpetual

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  • 1. Inventory Systems
  • 2. Chapter 6 I. This Week A. pp. 223 – 233 and Appendix 6A B. Contrast periodic and perpetual C. Financial statement preparation and formulas II. Fall Break III. Week After Break A. pp. 233 – 249 B. Appendix 6B and Appredix 6C
  • 3. Chapter 6 I. This Week A. Chap 5, pp. pp. 200-213 Chap 5, Appendix 5A Chap 6, pp. 228-233 B. Contrast periodic and perpetual C. Financial statement preparation and formulas II. Fall Break III. Week After Break A. Chap 6, pp. 233 – 247 B. Appendix 6A and Appendix 6B
  • 4. Chapter 6 I. This Week A. Chap 5, pp. pp. 200-213 Chap 5, Appendix 5A Chap 6, pp. 228-233 B. Contrast periodic and perpetual C. Financial statement preparation and formulas II. Fall Break III. Week After Break A. Chap 6, pp. 233 – 247 B. Appendix 6A and Appendix 6B
  • 5. Contrast Periodic and Perpetual
  • 6. Merchandising periodic perpetual
  • 7.  
  • 8. Merchandising periodic perpetual Review New
  • 9. What’s New?
    • new accounts
    • new look for transactions
    • new details on Income Statement
  • 10. New Accounts goods for resale co $ t Purchases contra contra “ sub” Merchandise Inventory Purchase Returns and Allowances Purchase Discounts Freight-In
  • 11. New Accounts retail contra contra Same Old Sales Sales Returns and Allowances Sales Discounts
  • 12. New Accounts Cost of Goods Sold expense No Such
  • 13. New Transactions (buyer’s point of view) Purchased merchandise from Seller, Inc., FOB shipping point, 2/10,n/30, $1,000. Purchases Look to Date Account Title Ref Debit Credit Merchandise Inventory 1,000 1,000 Accounts Payable
  • 14. New Transactions (buyer’s point of view) Paid Mack Trucking Company for freight charges, $100. Freight-In Look to Date Account Title Ref Debit Credit Merchandise Inventory 100 100 Cash
  • 15. New Transactions (buyer’s point of view) Returned $200 of defective goods, receiving credit. Purchases Returns and Allowances Look to Date Account Title Ref Debit Credit Merchandise Inventory 200 200 Accounts Payable
  • 16. New Transactions (buyer’s point of view) Paid the balance due within the discount period. Purchase Discount Look to Date Account Title Ref Debit Credit Accounts Payable Merchandise Inventory 800 16 Cash 784
  • 17. New Accounts Purchases Invoice 1,000 Cost Freight-In 100 Pur Disc 16 Purchase Returns and Allowances 200
  • 18. New Transactions (seller’s point of view) Sold merchandise (costing $60) to Buyer Co., FOB shipping point, 1/10,n/30, $100. Accounts Receivable 100 100 Sales Periodic requires only one entry. Date Account Title Ref Debit Credit Cost of Goods Sold Merchandise Inventory 60 60
  • 19. New Transactions (seller’s point of view) Issued a credit memo to Buyer for goods returned, $20 ($12 cost). Sales Returns and Allow. 20 20 Accounts Receivable Periodic only requires one entry. Date Account Title Ref Debit Credit Merchandise Inventory Cost of Goods Sold 12 12
  • 20. Summary of Periodic
    • PURCHASES account is debited when goods are acquired.
    • SALES is credited to record the sales price of the goods sold, but no entry is made to reduce inventory
    • THEREFORE
    • Must COMPUTE Cost of Goods Sold in order to find Net Income.
  • 21. Financial Statement Formulas
  • 22. Financial Statements Some Company Income Statement For the Year Ended 12/31/xx Sales $ xxx,xxx Cost of Goods Sold xx,xxx GROSS PROFIT $ x,xxx Sales ¹ - Cost of Goods Sold ² = Gross Profit
  • 23. ¹ “Sales” means “ net sales”
  • 24. New Accounts retail contra contra Same Old Sales Sales Returns and Allowances Sales Discounts
  • 25. Financial Statements Some Company Income Statement For the Year Ended 12/31/xx Sales $ xxx,xxx Less: SR&A x,xxx S Disc xxx x,xxx Net Sales $ xxx,xxx Cost of Goods Sold xx,xxx GROSS PROFIT $ x,xxx
  • 26. ² Cost of Goods Sold Beginning Inventory + Purchases ³ = Goods Available for Sale - Ending Inventory = Cost of Goods Sold It’s a formula… not an account!
  • 27. “ Purchases”
  • 28. ³ “Purchases” means “ net purchases”
  • 29. New Accounts goods for resale co $ t contra contra Purchases Purchase Returns and Allowances Purchase Discounts Freight-In
  • 30. ³ “Purchases” means “Net Purchases” Gregg & Wilson Purchases + Freight-In - Pur Ret & Allow - Pur Discounts = Net Purchases Weygandt, Kieso, Kimmel Purchases - Pur Ret & Allow - Pur Discounts = Net Purchases + Freight-In = Cost of Goods Purchased
  • 31. New Accounts goods for resale co $ t contra contra Purchases Purchase Returns and Allowances Purchase Discounts Freight-In
  • 32. ³ “Purchases” means “Net Purchases” Gregg & Wilson Purchases + Freight-In - Pur Ret & Allow - Pur Discounts = Net Purchases Weygandt, Kieso, Kimmel Purchases - Pur Ret & Allow - Pur Discounts = Net Purchases + Freight-In = Cost of Goods Purchased Go With This!
  • 33. OUR Company
  • 34. Beginning Inventory Purchases Ending Inventory Cost of Goods Sold Goods Available For Sale
  • 35. Beginning Inventory Purchases Ending Inventory Cost of Goods Sold Goods Available For Sale
  • 36. B I + P = GAFS - EI = COGS
  • 37. B I + P = GAFS - EI = COGS
  • 38. Beginning Inventory Purchases GAFS Ending Inventory COGS To Balance Sheet To Income Statement
  • 39. Practice Exercise
  • 40. Revision
  • 41. Revision January 1 was…
  • 42. Revision
  • 43. Revision $30,000 $22,000
  • 44. From the list of accounts in the handout, prepare an income statement through gross profit.
  • 45. Where do we start? What’s the first thing you do when you prepare an Income Statement?
  • 46.  
  • 47.  
  • 48.  
  • 49.  
  • 50.  
  • 51. Beginning Inventory Purchases Ending Inventory Cost of Goods Sold Goods Available For Sale
  • 52. B I + P = GAFS - EI = COGS
  • 53.  
  • 54.  
  • 55.  
  • 56.  
  • 57. ³ “Purchases” means “Net Purchases” Gregg & Wilson Purchases + Freight-In - Pur Ret & Allow - Pur Discounts = Net Purchases Weygandt, Kieso, Kimmel Purchases - Pur Ret & Allow - Pur Discounts = Net Purchases + Freight-In = Cost of Goods Purchased Go With This!
  • 58.  
  • 59.  
  • 60. B I + P = GAFS - EI = COGS
  • 61.  
  • 62.  
  • 63.  
  • 64. B I + P = GAFS - EI = COGS
  • 65.  
  • 66. Who learned something today?
  • 67. Have a great day…
  • 68. … a great week…
  • 69. … and a FABULOUS fall break!