ACC 201 Module 3 Notes - Saint Leo University



ACC 201 Module 3 NotesMerchandise OperationsBasic Income Statement for merchandise companiesNet SalesLess: Cost of Goods SoldEquals: Gross ProfitMinus: ExpensesEquals: Net IncomeCost of Goods Sold ScheduleBeginning InventoryPlus: Net PurchasesEquals: Merchandise Available for SaleMinus: Ending InventoryEquals: Cost of Goods SoldAccounting for Purchases of InventoryBasic journal entries for purchasing of inventory (review the AVP for information on purchase discounts):1. Purchase of Inventory on accountMerchandise InventoryXXXXAccounts PayableXXXXX2. Purchase Return or AllowanceAccounts PayableXXXXXMerchandise InventoryXXXXX3. Payment for MerchandiseAccounts PayableXXXXXCashXXXXXAccounting for Sale of InventoryBasic journal entries for sale of inventory (review the AVP for information on sales discounts):1. Sale of Inventory on AccountAccounts ReceivableXXXXXSales RevenueXXXXXandCost of Goods SoldXXXXXMerchandise InventoryXXXXX2. Sale Returns or AllowanceSale Return and AllowanceXXXXXAccounts ReceivableXXXXXandMerchandise InventoryXXXXXCost of Goods SoldXXXXX3. Payment for InventoryCashXXXXXAccounts ReceivableXXXXXInventory Costing MethodsThere are four basic methods of inventory costing:Specific IdentificationWeighted AverageFirst-in, First-out (FIFO)Last-in, First-out (LIFO) ................
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