Accounting for a Merchandising Firm
(Reference: text, chapter #11)
In order to successfully complete the 3A Accounting test on accounting for a merchandising firm, the
student should be able to perform the following tasks:
- explain the necessity of expanding a business' ledger system in order to accomodate the growth of its credit customers
and its creditors.
- record sales and purchase entries, involving both credit customers and creditors, within this expanded ledger system.
- differentiate between the:
- accounts receivable ledger,
- accounts payable ledger, and
- the general ledger.
- explain the procedures involved in maintaining a three-ledger system.
- correctly balance the three-ledger system by producing both an Accounts Receivable Trial Balance and
an Accounts Payable Trial Balance.
- In addition, students must be able to demonstrate:
- non-routine entries to subsidiary ledgers,
- daily posting to subsidiary ledgers, and
- how to locate errors when a subsidiary ledger does not balance.
- prepare individual statements of account for a credit customers.
- differentiate between manual and automated accounting systems.
- demonstrate or explain how accounting procedures for a merchandising business differ significantly
from the accounting procedures we have learned for a service business.
- explain the need for developing a cost of goods sold section within a merchandising firm's Income
- calculate the following figures within a merchandising firm's Income Statement:
- Net Sales;
- Cost of Goods Sold;
- Gross Profit From Sales; and
- Net Income
- demonstrate and/or explain how merchandise inventory under the periodic inventory system is managed.
- demonstrate and/or explain how merchandise inventory under the perpetual inventory system is managed.
- record the following transactions for a merchandising business under either the periodic or the perpetual system:
- the purchase of inventory, and
- the sale of merchandise.
- demonstrate how merchandise inventory, under the periodic or the perpetual system, is recorded within an
- record the following account balances within the worksheet:
- the purchase of inventory within the "Purchases" account;
- the sale of merchandise within the "Sales" account; and
- demonstrate the closing entries for a merchaindising business operating under either the "periodic" or the "perpetual" system;
- record the following transactions for associated with merchandise returns and allowances:
- journalize credit and cash refunds within the books of the seller;
- journalize credit and cash returns within the books of the purchaser;
- explain and/or demonstrate how the following accounts affect either sales revenue or cost of goods sold:
- Sales Returns and Allowances (a contra revenue account); and
- Purchases Returns and Allowances (a contra expense account under the periodic inventory method)
- explain and/or demonstrate how the perpetual inventory system differs from the periodic inventory system.
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