Merchandising operation and merchandise inventory
Merchandising operation and merchandise inventory
Businesses
that sell a product to customers
Inventory
Merchandise
held for sale
Asset account
3
Describe and illustrate merchandising operations and the two types of inventory systems 4
Balance Sheet
Inventory
Asset
Income Statement
Sales
revenue
Cost of goods sold
Expense
5
Cash
Purchase inventory Collect cash from customers
Accounts receivable Sell inventory Inventory
6
PERIODIC
Goods
counted periodically to determine quantity
Used by small businesses Less popular now because of computerized inventory systems PERPETUAL
Record
of quantity of goods is constantly updated Better control of inventory Popular now due to bar codes and computer scanning 7
Learning Objective 2
Distinguish between merchandising and manufacturing
Difference between Merchandising and
Manufacturing
Manufacturing
converts raw materials to finished goods for sale
Merchandising
merchandising companies purchases finished goods for sale.
In the Income Statement,
Cost of goods sold =
Beginning finished goods inventory plus cost of goods manufactured minus ending finished goods inventory
In the Income Statement,
Cost of goods sold =
Beginning merchandise inventory plus cost of goods purchased minus ending merchandise inventory.
In the Balance Sheet, three inventory accounts : finished goods, work in process, and raw materials.
In the Balance Sheet, only merchandise inventory
Manufacturing Cost Flows
Costs
Balance Sheet
Inventories
Material Purchases
Raw Materials
Direct Labor
Work in
Process
Manufacturing
Overhead
Selling and
Administrative
Finished
Goods
Period Costs
Income
Statement
Expenses
Cost of
Goods
Sold
Selling and
Administrative
The Income Statement
Cost of goods sold for manufacturers
Businesses
that sell a product to customers
Inventory
Merchandise
held for sale
Asset account
3
Describe and illustrate merchandising operations and the two types of inventory systems 4
Balance Sheet
Inventory
Asset
Income Statement
Sales
revenue
Cost of goods sold
Expense
5
Cash
Purchase inventory Collect cash from customers
Accounts receivable Sell inventory Inventory
6
PERIODIC
Goods
counted periodically to determine quantity
Used by small businesses Less popular now because of computerized inventory systems PERPETUAL
Record
of quantity of goods is constantly updated Better control of inventory Popular now due to bar codes and computer scanning 7
Learning Objective 2
Distinguish between merchandising and manufacturing
Difference between Merchandising and
Manufacturing
Manufacturing
converts raw materials to finished goods for sale
Merchandising
merchandising companies purchases finished goods for sale.
In the Income Statement,
Cost of goods sold =
Beginning finished goods inventory plus cost of goods manufactured minus ending finished goods inventory
In the Income Statement,
Cost of goods sold =
Beginning merchandise inventory plus cost of goods purchased minus ending merchandise inventory.
In the Balance Sheet, three inventory accounts : finished goods, work in process, and raw materials.
In the Balance Sheet, only merchandise inventory
Manufacturing Cost Flows
Costs
Balance Sheet
Inventories
Material Purchases
Raw Materials
Direct Labor
Work in
Process
Manufacturing
Overhead
Selling and
Administrative
Finished
Goods
Period Costs
Income
Statement
Expenses
Cost of
Goods
Sold
Selling and
Administrative
The Income Statement
Cost of goods sold for manufacturers