Accounting for Merchandising Operations Recording Purchases of Merchandise
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4 سال پیش
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Merchandising is one of the
Merchandising is one of the largest and most influential industries worldwide. In this video you will learn the basics about reporting merchandising transactions.
A merchandising company is a company that buys goods and then resells them, generally for a higher price than they were purchased. There are two types of merchandising companies - retail and wholesale. A retail company is a company that sells products directly to customers, where a wholesale company is a company that buys items in bulk from manufacturers and resells them to retailers or other wholesalers. they buy and sell merchandise rather than perform services as their primary source of revenue.
The operating cycle of a merchandising company ordinarily is longer than that of a service company.
A merchandising company engages in the purchase and resale of tangible goods. Service companies primarily sell services rather than tangible goods. The purchase of merchandise inventory and its eventual sale lengthen the cycle.
The primary source of revenues is referred to as sales revenue or sales.
Cost of goods sold is the total cost of merchandise sold during the period.
The items in the two blue boxes are unique to a merchandising company; they are not used by a service company
Companies use either a perpetual inventory system or a periodic inventory system to account for inventory.
All merchandising companies have to have some type of system to keep up with their inventory. They have two options to choose from: a perpetual system or a periodic system. A perpetual system is a system that updates inventory as each sale is made
Perpetual systems are ideal because they give you actual inventory counts at any given point and time, but they usually have a very expensive initial cost to implement.
Additional consideration Perpetual System:
Traditionally used for merchandise with high unit values.
Provides better control over inventories.
Requires additional clerical work and additional cost to maintain inventory records.
while a periodic system is a system that updates inventory at a specific point in time
Periodic systems are much less expensive to implement but lack the capability of giving you an up-to-date inventory count at any given time.
The flow of costs for a merchandising company is as follows: Beginning inventory plus the cost of goods purchased is the cost of goods available for sale. As goods are sold, they are assigned to cost of goods sold. Those goods that are not sold by the end of the accounting period represent ending inventory
FOB shipping point: Seller places goods Free On Board the carrier, and buyer pays freight costs.
FOB Destination: Seller places goods Free On Board to the buyer’s place of business, and seller pays freight costs.
Freight costs incurred by the seller are an operating expense.
Purchase Returns and Allowances: Purchaser may be dissatisfied because goods are damaged or defective, of inferior quality, or do not meet specifications.
Purchase Return: Return goods for credit if the sale was made on credit, or for a cash refund if the purchase was for cash.
Purchase allowance: May choose to keep the merchandise if the seller will grant an allowance (deduction) from the purchase price.
Purchase discounts: Credit terms may permit buyer to claim a cash discount for prompt payment.
Advantages:
Purchaser saves money.
Seller shortens the operating cycle.
Mistake 3234 in cash not 3244
0:00 Merchandising Operations
1:02 Merchandising company Operating cycle
1:53 Measure income in merchandising operations
3:47 Perpetual system
5:00 Periodic system
6:58 Recording Purchase of Merchandise
8:45 FOB Shipping Point or FOB Destination
12:13 Purchase return or Allowance
14:03 Purchase discounts
#merchandisingoperations #accounting #accountingforbeginners
A merchandising company is a company that buys goods and then resells them, generally for a higher price than they were purchased. There are two types of merchandising companies - retail and wholesale. A retail company is a company that sells products directly to customers, where a wholesale company is a company that buys items in bulk from manufacturers and resells them to retailers or other wholesalers. they buy and sell merchandise rather than perform services as their primary source of revenue.
The operating cycle of a merchandising company ordinarily is longer than that of a service company.
A merchandising company engages in the purchase and resale of tangible goods. Service companies primarily sell services rather than tangible goods. The purchase of merchandise inventory and its eventual sale lengthen the cycle.
The primary source of revenues is referred to as sales revenue or sales.
Cost of goods sold is the total cost of merchandise sold during the period.
The items in the two blue boxes are unique to a merchandising company; they are not used by a service company
Companies use either a perpetual inventory system or a periodic inventory system to account for inventory.
All merchandising companies have to have some type of system to keep up with their inventory. They have two options to choose from: a perpetual system or a periodic system. A perpetual system is a system that updates inventory as each sale is made
Perpetual systems are ideal because they give you actual inventory counts at any given point and time, but they usually have a very expensive initial cost to implement.
Additional consideration Perpetual System:
Traditionally used for merchandise with high unit values.
Provides better control over inventories.
Requires additional clerical work and additional cost to maintain inventory records.
while a periodic system is a system that updates inventory at a specific point in time
Periodic systems are much less expensive to implement but lack the capability of giving you an up-to-date inventory count at any given time.
The flow of costs for a merchandising company is as follows: Beginning inventory plus the cost of goods purchased is the cost of goods available for sale. As goods are sold, they are assigned to cost of goods sold. Those goods that are not sold by the end of the accounting period represent ending inventory
FOB shipping point: Seller places goods Free On Board the carrier, and buyer pays freight costs.
FOB Destination: Seller places goods Free On Board to the buyer’s place of business, and seller pays freight costs.
Freight costs incurred by the seller are an operating expense.
Purchase Returns and Allowances: Purchaser may be dissatisfied because goods are damaged or defective, of inferior quality, or do not meet specifications.
Purchase Return: Return goods for credit if the sale was made on credit, or for a cash refund if the purchase was for cash.
Purchase allowance: May choose to keep the merchandise if the seller will grant an allowance (deduction) from the purchase price.
Purchase discounts: Credit terms may permit buyer to claim a cash discount for prompt payment.
Advantages:
Purchaser saves money.
Seller shortens the operating cycle.
Mistake 3234 in cash not 3244
0:00 Merchandising Operations
1:02 Merchandising company Operating cycle
1:53 Measure income in merchandising operations
3:47 Perpetual system
5:00 Periodic system
6:58 Recording Purchase of Merchandise
8:45 FOB Shipping Point or FOB Destination
12:13 Purchase return or Allowance
14:03 Purchase discounts
#merchandisingoperations #accounting #accountingforbeginners
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