Accounting for Merchandising Business
Accounting for Merchandising Business
A. Comparison of Income Statement
Service Company Net Income = Revenues – Expenses
Merchandising Company
Net Sales - Cost of Goods Sold = Gross Profit/ Margin from Sales
Gross Profit/ Margin from Sales – Operating Expenses = Operating Income
Operating Income – Finance Costs = Net Income
Sample Problem:
Carlito Delights Income Statement
For the Year Ended December 31, 2013
Net Sales P 2,393,250
Cost of Goods Sold 1,313,600
Gross Profit from Sales 1,079,650
Operating Expenses 586,040
Operating Income 493,610
Finance Costs 38,400
Net Income P 455,210
B. Operating Cycle of a Merchandising Business Cash Sales Sales On Account Inventory Inventory
Purchase Sales Purchase Sales Cash Cash Accounts Payable Collect
C. Source Document - evidence of transaction
1. Sales Invoice - to inform the buyer the total cost of shipment
2. Bill of Loading - issued by the shipping company, agreement between the shipping companies.
3. Statement of Account - sent by the seller to the buyer to inform the buyer of the invoices already due.
4. Official Receipt - evidence that the seller have receives payment from the buyer.
5. Deposit Slips - contains name of the holder, account number, account to be paid Validated deposit - the money deposited have been received by the buyer. 6. Check- written document instructing a bank to pay the person the specified amount. note:check is more secure 7. Purchase Requisition – Document generated by a user department or storeroom-personnel to notify the purchasing department of items it needs to order, their quantity, and the timeframe. It may also contain the authorization to proceed with the purchase. 8. Purchase Order – A purchase order sets forth the descriptions, quantities, prices, discounts, payment terms, date of performance or shipment, other associated terms and
A. Comparison of Income Statement
Service Company Net Income = Revenues – Expenses
Merchandising Company
Net Sales - Cost of Goods Sold = Gross Profit/ Margin from Sales
Gross Profit/ Margin from Sales – Operating Expenses = Operating Income
Operating Income – Finance Costs = Net Income
Sample Problem:
Carlito Delights Income Statement
For the Year Ended December 31, 2013
Net Sales P 2,393,250
Cost of Goods Sold 1,313,600
Gross Profit from Sales 1,079,650
Operating Expenses 586,040
Operating Income 493,610
Finance Costs 38,400
Net Income P 455,210
B. Operating Cycle of a Merchandising Business Cash Sales Sales On Account Inventory Inventory
Purchase Sales Purchase Sales Cash Cash Accounts Payable Collect
C. Source Document - evidence of transaction
1. Sales Invoice - to inform the buyer the total cost of shipment
2. Bill of Loading - issued by the shipping company, agreement between the shipping companies.
3. Statement of Account - sent by the seller to the buyer to inform the buyer of the invoices already due.
4. Official Receipt - evidence that the seller have receives payment from the buyer.
5. Deposit Slips - contains name of the holder, account number, account to be paid Validated deposit - the money deposited have been received by the buyer. 6. Check- written document instructing a bank to pay the person the specified amount. note:check is more secure 7. Purchase Requisition – Document generated by a user department or storeroom-personnel to notify the purchasing department of items it needs to order, their quantity, and the timeframe. It may also contain the authorization to proceed with the purchase. 8. Purchase Order – A purchase order sets forth the descriptions, quantities, prices, discounts, payment terms, date of performance or shipment, other associated terms and