Quiz (chapter 5) will occur on Thursday Oct 9

1
2
Unit 2 Chapter 5
Quiz (chapter 5) will occur on Thursday Oct 9
2
3
Freight Terms
3
3
Sales Taxes
On a regular basis, the seller pays to the taxing
authority (CRA) the amount of the sales taxes
collected. Nov 30 HST Payable 2500 HST
Recoverable 500 Bank 2000 Sending HST
remittance to CRA
4
4
Describe the adjusting and closing process for a
merchandising business.
5-99
5
4
Merchandising businesses may experience some loss
of inventory due to shoplifting, employee theft,
or errors in recording or counting inventory. If
the balance of the Merchandise Inventory account
is larger than the total amount of the
merchandise count, the difference is often called
inventory shrinkage or inventory shortage.
6
4
NetSolutions inventory records indicate the
following on December 31, 2011
Dec. 31, 2011
Account balance of Merchandise Inventory 63,950 P
hysical merchandise inventory on hand
62,150 Inventory shrinkage 1,800
7
4
At the end of the accounting period, inventory
shrinkage is recorded by the following adjusting
entry
8
4
Step 1 Closing Entries
Debit each temporary account with a credit
balance, such as Sales, for its balance and
credit Income Summary.
9
Step 2 Closing Entries
4
Credit each temporary account with a debit
balance, such as an expense, for the balance and
credit Income Summary.
10
4
Step 3 Closing Entries
Debit Income Summary for the amount of its
balance (net income) and credit Retained
Earnings. (or Capital)
11
4
Step 4 Closing Entries
Debit Retained Earnings for the balance of the
Dividends account and credit the Dividends
account.(same as Drawings account)
12
4
NetSolutions Income Summary account after the
closing entries have been posted is as follows
13
2
Single-Step Income Statement
14
2
Multiple-Step Income Statement (concluded)
15
1
Nature of Merchandising Businesses
Income Statement of Merchandising Business
Sales XXX Cost of Merchandise Sold XXX Gross
Profit XXX Operating Expenses XXX Net
Income XXX
16
1
Nature of Merchandising Businesses
When merchandise is sold, the revenue is reported
as sales, and its cost is recognized as an
expense called cost of merchandise sold.
17
1
Nature of Merchandising Businesses
Merchandise on hand (not sold) at the end of an
accounting period is called merchandise inventory.
18
2
Multiple-Step Income Statement
The multiple-step income statement contains
several sections, subsections, and subtotals.
19
2
Multiple-Step Income Statement
(continued on Slide 19)
20
2
Multiple-Step Income Statement
The Sales account provides the total amount
charged to customers for merchandise sold,
including cash sales and sales on account.
21
2
Multiple-Step Income Statement
Sales returns and allowances are granted by the
seller to customers for damaged or defective
merchandise.
22
2
Multiple-Step Income Statement
Sales discounts are granted by the seller to
customers for early payment of amounts owed.
23
2
Classwork / Homework
P260 E5-4, E5-5, E5-6, E5-7