20100726090715 chapter 3 the asset of stock

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  • 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information)
  • 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information)
  • 20100726090715 chapter 3 the asset of stock

    1. 1. Chapter 3 THE ASSET OF STOCK
    2. 2. <ul><li>Explain the meaning of terms purchase and sales as used in accounting. </li></ul><ul><li>Explain the differences in recording purchases on credit as compared to recording purchases that are paid for immediately in cash. </li></ul><ul><li>Explain the differences in recording sales on credit as compared to recording sales that are paid for immediately in cash. </li></ul>Study Objectives
    3. 3. <ul><li>Purchases in accounting means the purchase of goods which the business buys with the prime intention of selling. </li></ul><ul><li>Sales means the sale of those goods in which the business normally deals and which were bought with the prime intention of resale. </li></ul>Special meaning of sales and purchases
    4. 4. Stock Movement <ul><li>Good or services are sold above cost price </li></ul><ul><li>Goods or services are sold for less than their cost. </li></ul>Profit LO 1 Explain what an account is and how it helps in the recording process. Loss
    5. 5. Stock Movement <ul><li>The purchase of additional goods. </li></ul><ul><li>The return in to the business of goods previously sold </li></ul><ul><li>Therefore we have to open 2 account: </li></ul><ul><li>Purchase Account </li></ul><ul><li>A Return Inwards Account </li></ul>Increase in stock LO 1 Explain what an account is and how it helps in the recording process.
    6. 6. Stock Movement <ul><li>The sale of goods. </li></ul><ul><li>Good previously bought by the business now being returned to supplier. </li></ul><ul><li>Therefore we have to open 2 account: </li></ul><ul><li>A Sales Account </li></ul><ul><li>A Return Outwards Account </li></ul>Decrease in stock LO 1 Explain what an account is and how it helps in the recording process.
    7. 7. Purchase of stock on credit <ul><li>On 1 August 20X8, goods costing RM165 are bought on credit from D Henry. </li></ul><ul><li>Therefore: </li></ul><ul><li>The asset of stock is increased. </li></ul><ul><li>There is an increase in a liability. </li></ul>LO 2 Define debits and credits and explain their use in recording business transactions.
    8. 8. Purchases of stock on credit $10,000 Aug 1 Purchases 165 Balance Transaction #1 LO 2 Define debits and credits and explain their use in recording business transactions. Aug 1 Henry 165
    9. 9. Purchases of stock for cash <ul><li>On 2 August 20X8, goods costing RM310 are bought, cash being paid for them immediately at the time of purchases. </li></ul><ul><li>Therefore: </li></ul><ul><li>The movement of stock is that of a purchase. </li></ul><ul><li>The asset of cash is decreased. </li></ul>LO 2 Define debits and credits and explain their use in recording business transactions.
    10. 10. Purchases of stock for cash $10,000 Aug 2 Purchases 310 Balance Transaction #1 LO 2 Define debits and credits and explain their use in recording business transactions. Aug 1 Cash 310
    11. 11. Sales of stock on credit <ul><li>On 3 August 20X8, goods were sold on credit for RM375 to J Lee. </li></ul><ul><li>Therefore: </li></ul><ul><li>An asset is increased. </li></ul><ul><li>The asset of stock is decreased. </li></ul>LO 2 Define debits and credits and explain their use in recording business transactions.
    12. 12. Sales of stock on credit $10,000 Aug 3 J Lee 375 Balance Transaction #1 LO 2 Define debits and credits and explain their use in recording business transactions. Aug 3 Sales 375
    13. 13. Sales of stock for cash <ul><li>On 4 August 20X8, goods are sold for RM55, cash being received immediately at the time of sale </li></ul><ul><li>Therefore: </li></ul><ul><li>The asset of cash is increased. </li></ul><ul><li>The asset of stock is reduced </li></ul>LO 2 Define debits and credits and explain their use in recording business transactions.
    14. 14. Sales of stock for cash $10,000 Aug 4 Cash 55 Balance Transaction #1 LO 2 Define debits and credits and explain their use in recording business transactions. Aug 4 Sales 55
    15. 15. Return Inwards (Sales Return) <ul><li>On 5 August 20X8, goods which had been previously sold to F Lowe for RM29 are now returned to the business. This could be for various reason such as: </li></ul><ul><li>We sent goods of the wrong size, wrong colour or the wrong model. </li></ul><ul><li>The goods may have been damaged in transit. </li></ul><ul><li>The goods of poor quality. </li></ul>LO 2 Define debits and credits and explain their use in recording business transactions.
    16. 16. Return Inwards (Sales Return) <ul><li>Therefore: </li></ul><ul><li>The asset of stock is increased by the goods returned. </li></ul><ul><li>2. There is a decrease in an asset. </li></ul>LO 2 Define debits and credits and explain their use in recording business transactions.
    17. 17. Return Inwards (Sales Return) $10,000 Aug 5 R Inward 29 Balance Transaction #1 LO 2 Define debits and credits and explain their use in recording business transactions. Aug 5 F Lowe 29
    18. 18. Returns Outwards (Purchase Return) <ul><li>On 6 August 20X8, goods previously bought for RM96 are returned by the business to K Howe. </li></ul><ul><li>The liability of the business to K Howe is decreased by the value of the goods returned. </li></ul><ul><li>The asset of stock is decreased by the goods sent out. </li></ul>LO 2 Define debits and credits and explain their use in recording business transactions.
    19. 19. Return Outwards (Purchase Return) $10,000 Aug 6 K Howe 96 Balance Transaction #1 LO 2 Define debits and credits and explain their use in recording business transactions. Aug 6 R Outwards 96
    20. 20. End – Chapter 3

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