After completing this chapter you should be able to: Identify the differences between service and merchandising companies, explain the recording of purchases under a perpetual inventory system, explain the recording of sales revenues under a perpetual inventory system,and other contents. | CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS Accounting Principles, Eighth Edition Identify the differences between service and merchandising companies. Explain the recording of purchases under a perpetual inventory system. Explain the recording of sales revenues under a perpetual inventory system. Explain the steps in the accounting cycle for a merchandising company. Distinguish between a multiple-step and a single-step income statement. Explain the computation and importance of gross profit. Determine cost of goods sold under a periodic system. Study Objectives 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information) Accounting for Merchandising Operations Freight costs Purchase returns and allowances Purchase discounts Summary of purchasing transactions Merchandising Operations Recording Purchases of Merchandise Recording Sales of Merchandise Completing the Accounting Cycle Forms of Financial Statements Operating cycles Inventory systems—perpetual and periodic Sales returns and allowances Sales discounts Adjusting entries Closing entries Summary of merchandising entries Multiple-step income statement Single-step income statement Classified balance sheet Determining cost of goods sold under a periodic system Service Cost - Actuaries compute service cost as the present value of the new benefits earned by employees during the year. Future salary levels considered in calculation. Interest on Liability - Interest accrues each year on the PBO just as it does on any discounted debt. Actual Return on Plan Assets - Increase in pension funds from . | CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS Accounting Principles, Eighth Edition Identify the differences between service and merchandising companies. Explain the recording of purchases under a perpetual inventory system. Explain the recording of sales revenues under a perpetual inventory system. Explain the steps in the accounting cycle for a merchandising company. Distinguish between a multiple-step and a single-step income statement. Explain the computation and importance of gross profit. Determine cost of goods sold under a periodic system. Study Objectives 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and .
