Merchandising Operations

1
Chapter 5

• Merchandising Operations

2
Transactions Under the Inventory Methods

• The way certain transactions are recorded varies
  with inventory system being used
• Types of transactions affected
• additions to inventory
• returns of inventory purchased
• sales
• sales returns
• inventory shrinkage

3
Additions to Inventory

• Perpetual System
• To record the acquisition of 4,890 of
  additional product
• Merchandise Inv 4,890
• Accounts Payable 4,890

4
Freight In

• Perpetual System
• To record the cost of freight on the 4,890 of
  additional inventory
• Freight In (an expense) 160
• Accounts Payable 160

5
Return of Inventory Acquired Payment of
Remaining Payable

• Perpetual System
• To record the return of 480 of inventory just
  acquired
• Accounts Payable 480
• Merchandise inventory 480
• To record payment of the remaining payable
• Accounts Payable 4,410
• Cash
  4,410

6
Sale of Product

• Perpetual System
• To record the sale of product costing 720 for
  1,200
• Accounts Receivable 1,200
• Sales
  1,200
• Cost of Goods Sold 720
• Merchandise inventory 720
  

7
Seller Pays Freight to Deliver

• Perpetual System
• To record the cost to deliver the 1,200 sale of
  78
• Freight Out (Delivery) Exp 78
• Cash (or Accts Pay) 78
  

8
Customer Returns Product

• Perpetual System
• To record the return of product sold for 300 and
  which cost for 180
• Sales Returns Allow 300
• Accounts Rec (or Cash) 300
• Merchandise Inventory 180
• Cost of Goods Sold 180

9
Inventory Shrinkage - Perpetual Inventory System

• Physical inventory should validate the accuracy
  of perpetual inventory valuation
• Shrinkages (physical lt perpetual)
• inaccuracies in recording transactions during
  year
• spoilage
• shoplifting
• employee theft

10
Inventory Shrinkage - Perpetual Inventory System

• Reduce Inventory with offset to Cost of Goods
  Sold
• Cost of Goods Sold x,xxx
• Merchandise Inv. x,xxx