ACCT 201 Service Organizations ACCT 201 Service organizations sell time to earn revenue. ACCT 201 Examples: accounting firms, law firms, and plumbing services.
ACCT 201 Inventory Systems ACCT 201 Beginning inventory + Net cost of purchases Merchandise available for sale ACCT 201 Ending Inventory + Cost of Goods Sold
ACCT 201 Periodic Inventory System ACCT 201 Physically count inventory, usually at end of accounting period. No detailed records of the actual inventory are maintained during the accounting period. ACCT 201 Less costly than perpetual inventory method, but provides less information.
Periodic Inventory When Method Inventory is Accts. Payable xxx Pur. Disc. xxx Purchased Purchases xxx Pur. R&A xxx Inventory BI xxx The Inventory Account is not updated when inventory is purchased.
Cost of Goods Sold Component Amount Beginning Inventory $52,800 Net Purchases 126,860 Goods Available for Sale 179,660 Less: Ending Inventory Cost of Goods Sold 48,300 $131,660
ACCT 201 Perpetual Inventory System ACCT 201 Continuous records are kept of the quantity and, usually, the cost of individual items as they are bought and sold. ACCT 201 More effective for providing information about quantities and ensuring optimal customer service.
ACCT 201 Perpetual Inventory System ACCT 201 In a perpetual inventory system, each purchase and sale of merchandise is recorded in an inventory account. ACCT 201 In this way, the inventory records always (perpetually) disclose the amount of inventory on hand the the amount sold.
ACCT 201 Main Source, Inc. 614 Tech Avenue Nashville, TN 37651 ACCT 201 P.O. 167 Item AC417 S o l d T o Sales: 25 Invoice Name: Barbee, Inc. Attn: Tom Bell Address: One Willow Plaza Cookeville, Tennessee 38501 Terms 2/10,n/30 Description 250 Backup System ACCT 201 We appreciate your business! Date 5/4/02 Number 358-BI Seller Seller Invoice Invoice date Purchaser Order Order number number Credit terms terms Freight Freight terms terms Goods Goods Invoice Invoice amount amount Ship: FedEx Prepaid Quanity Price Amount 500 $ 54.00 $ 27,000 Sub Total Ship Chg. Tax Total $ 27,000 27,000
ACCT 201 Trade Discounts ACCT 201 Used by manufacturers and wholesalers to change selling prices without republishing their catalogs. Example ACCT 201 JenCo, Inc. offers a 30% trade discount on orders of 1,000 units or more of their popular product Racer. Each Racer has a list price of $5.25.
Purchase Discounts A deduction from the invoice price granted to induce early payment of the amount due. Terms Time Due Discount Period Credit Period Full amount less discount Full amount due Purchase or Sale Exhibit 4-7
Purchase Discounts 2/10,n/30 Discount Discount Percent Percent Number Number of of Days Days Discount Discount Is Is Available Available Otherwise, Otherwise, Net Net (or (or All) All) Is Is Due Due Credit Credit Period Period
ACCT 201 Purchase Discounts ACCT 201 On May 7, Martin, Inc. purchased $27,000 of Merchandise Inventory on account, credit terms are 2/10, n/30. GENERAL JOURNAL ACCT 201 Date May Description 7 Merchandise Inventory Accounts Payable Page 49 PR Debit Credit 27,000 27,000
ACCT 201 Purchase Discounts ACCT 201 On May 15, Martin, Inc. paid the amount due on the purchase of May 7. GENERAL JOURNAL Date Description May 15 Accounts payable Page 55 PR Debit Credit 27,000 Cash ACCT 201 Merchandise inventory $27,000 × 2% = $540 discount 26,460 540
ACCT 201 Managing Discounts Annual Rate ACCT 201 If we fail to take a 2/10, n/30 discount, is it really expensive? 365 / 20 ACCT 201 Days in Year X 36.5 2% = % Percent paid to keep money Number of additional days before payment
ACCT 201 Purchase Returns and Allowances ACCT 201 Purchase Return . . . Merchandise returned by the purchaser to the supplier. Purchase Allowance . . . ACCT 201 A reduction in the cost of defective merchandise received by a purchaser from a supplier.
ACCT 201 Purchase Returns and Allowances ACCT 201 On May 9, Barbee, Inc. purchased $20,000 of Merchandise Inventory on account, credit terms are 2/10, n/30. GENERAL JOURNAL ACCT 201 Date May Description 9 Merchandise Inventory Accounts Payable Page 34 PR Debit Credit 20,000 20,000
ACCT 201 Purchase Returns and Allowances ACCT 201 On May 10, Barbee, Inc. returned $500 of defective merchandise to the supplier. GENERAL JOURNAL JOURNAL Date Description Description ACCT 201 May 10 Accounts payable Merchandise Inventory Page Page 37 37 PR PR Debit Debit Credit Credit 500 500
ACCT 201 Purchase Returns and Allowances ACCT 201 On May 18, Barbee, Inc. paid the amount owed for the May 9 purchase. GENERAL JOURNAL Date Description May 18 Accounts payable Merchandise inventory ACCT 201 Cash Page 61 PR Debit Credit 19,500 390 19,110
ACCT 201 Transportation Costs ACCT 201 On May 12, Barbee, Inc. purchased $8,000 of Merchandise for cash and also paid $100 transportation costs. GENERAL JOURNAL Date Description ACCT 201 May 12 Merchandise Inventory Cash Page 39 PR Debit Credit 8,100 8,100
ACCT 201 Recording Purchases Information ACCT 201 ACCT 201 Matrix, Inc. Total Cost of Merchandise Purchases For Year Ended December 31, 2002 Invoice cost of merchandise purchases $ 692,500 Less: Purchase discounts received (10,388) Purchase returns and allowances (4,275) Add: Cost of transportation-in 4,895 Total cost of merchandise purchases $ 682,732
ACCT 201 Sales Transactions ACCT 201 On March 18, TwoCom sold $25,000 of merchandise on account. The merchandise was carried in inventory at a cost of $18,000. GENERAL JOURNAL Date Description Mar. 18 Accounts Receivable Page 3 PR Debit 25,000 ACCT 201 Sales Cost of Goods Sold Merchandise Inventory Credit 25,000 18,000 18,000
ACCT 201 Sales Discounts ACCT 201 On June 8, Borey Co. sold merchandise costing $3,500 for $6,000 on account. Credit terms were 2/10, n/30. GENERAL JOURNAL Date Jun Description 8 Accounts Receivable Page 3 PR Debit Credit 6,000 ACCT 201 Sales Cost of Goods Sold Merchandise Inventory 6,000 3,500 3,500
ACCT 201 Sales Returns and Allowances ACCT 201 On June 12, Borey Co. sold merchandise costing $4,000 for $7,500 on account The credit terms were 2/10, n/30. GENERAL JOURNAL Date Description Jun 12 Accounts Receivable Page 4 PR Debit Credit 7,500 Sales ACCT 201 Cost of Goods Sold Merchandise Inventory 7,500 4,000 4,000
ACCT 201 Sales Returns and Allowances ACCT 201 On June 14, merchandise with a sales price of $800 and a cost of $470 was returned to Borey. The return is related to the June 12 sale. GENERAL JOURNAL Date Description Jun 14 Sales Returns and Allowances Page 3 PR Debit Credit 800 ACCT 201 Accounts Receivable Merchandise Inventory Cost of Goods Sold 800 470 470
ACCT 201 Sales Returns and Allowances ACCT 201 On June 20, Borey received the amount owed to it from the sale of June 12. GENERAL JOURNAL Date Description Jun 20 Cash ACCT 201 Sales Discounts Account Receivable Page 6 PR Debit Credit 6,566 134 6,700
ACCT 201 Exh. 6-11 Recording Sales Information ACCT 201 ACCT 201 Sales Sales discounts discounts and and returns returns and and allowances allowances are are Contra Contra Revenue Revenue accounts. accounts.
