(BQ) Part 2 book "Accounting principles I" has contents: Accounting for a merchandising company, subsidiary ledgers and special journals, cash, receivables, inventory, operating assests. | ACCOUNTING FO R A MERCHANDISING COMPAN Y Although the accounting cycle and the basic accounting principle s are the same for companies that sell merchandise and companies tha t provide services, merchandising companies use several accounts tha t service companies do not use . The balance sheet includes an additional current asset called merchandise inventory, or simply inventory, which records the cost of merchandise held for resale . On balanc e sheets, the inventory account usually appears just below account s receivable because inventory is less liquid than accounts receivable . Music Worl d Partial Balance Shee t June 30, 20X 3 ASSETS Current Assets Cash Accounts Receivable Inventory Supplies Prepaid Insurance Total Current Assets $10,000 2,000 37,000 1,000 2,00 0 $52,000 Merchandising companies also have several specific income statement accounts designed to provide detailed information about revenues and expenses associated with salable merchandise . Recording Sales Sales invoices are source documents that provide a record for eac h sale . For control purposes, sales invoices should be sequentiall y prenumbered to help the accounting department determine the dispo sition of every invoice . Sales revenues equal the selling price of al l products that are sold . In accordance with the revenue recognitio n ACCOUNTING PRINCIPLES I 85 ACCOUNTING FOR A MERCHANDISIN G COMPAN Y principle, sales revenue is recognized when a customer receives titl e to the merchandise, regardless of when the money changes hands . I f a customer purchases merchandise at a sales counter and takes possession of the goods immediately, the sales invoice or cash registe r receipt is the only source document needed to record the sale . However, if merchandise is shipped to the customer, a delivery record or ship ping document is matched with the invoice to prove that the merchan dise has been shipped to the customer . Suppose a company named Music Suppliers, Inc ., sells .
