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Chapter 5 Accounting for retail operations PowerPoint presentation by  Dr Anne Abraham University of Western Sydney ©2009 John Wiley & Sons Australia, Ltd
RETAIL OPERATIONS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney LO1
RETAIL OPERATIONS  continued ,[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Sales revenue Cost of sales Gross profit Operating expenses Profit (loss) Equals Less Less Equals
Operating cycles ,[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
Inventory systems ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Illustrated in this chapter
Inventory systems  continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
Inventory systems  continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Described in Appendix
RECORDING PURCHASES  OF INVENTORY ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney LO2
Purchases  continued ,[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 5  Inventory   3 800   Accounts Payable     3 800   (To record goods purchased on    account from Sellers Electrics)
Purchases returns and allowances ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
[object Object],[object Object],Purchases returns and allowances  continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 8  Accounts Payable   300 Inventory     300   (To record return of goods    received from Sellers Electrics)
Freight costs ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
Freight costs  continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 6  Freight-in 150 Cash     150   (To record payment of freight    on goods purchased)
Freight costs  continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney May 4  Freight-out   150   Cash     150   (To record payment of freight    on goods sold)
Purchase discounts ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 15  Accounts Payable  3 500   Cash     3 430    Discount Received   70   (To record payment within    the discount period)
Purchase discounts  continued ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney May 16  Inventory   3 600   Accounts Payable   3 600   (To record purchase of inventory on    account with a trade discount of $400)
RECORDING SALES OF INVENTORY ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
Sales  continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 4 cost of sales   2 400   Inventory    2 400   (To record cost of inventories   sold on invoice #731 to Beyer Video) Apr 4 Accounts Receivable   3 800   Sales    3 800   (To record credit sale to Beyer   Video per invoice #731)
Sales returns and allowances ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
Sales returns and allowances  continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 8  Inventory   140   cost of sales    140   (To record cost of goods returned) Apr 8  Sales Returns and Allowances   300   Accounts Receivable     300   (To record credit granted to Beyer   Video for returned goods)
Sales returns and allowances  continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 8  Sales Returns and Allowances   300   Accounts Receivable     300   (To record credit granted to Beyer   Video for returned goods) Apr 5  Inventory Write-down   140   Cost of sales    140   (To record cost of faulty goods    returned)
Sales discounts ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 14  Cash   3 430   Discount Allowed       70   Accounts Receivable   3 500   (To record collection within 2/7 n/30    discount period from Beyer Video)
COMPLETING  THE ACCOUNTING CYCLE ,[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney LO4
COMPLETING  THE ACCOUNTING CYCLE  continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
Closing entries illustrated PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Dec 31  Sales   480 000   Profit and Loss Summary     480 000   (To close income statement account with   credit balances) 31  Profit and Loss Summary   450 000     Sales Returns and Allowances       12 000   Sales Discounts   8 000   Cost of sales   316 000   Store Salaries Expense     45 000   Administrative Salaries Expense       19 000   Freight-out   7 000   Advertising Expense   16 000   Utilities Expense   17 000   Depreciation Expenses     8 000   Insurance Expense     2 000    (To close income statement accounts with   debit balances) 31  Profit and Loss Summary     30 000   RA Lewis, Capital       30 000   (To close profit to capital) 31  RA Lewis, Capital     15 000   RA Lewis, Drawings     15 000   (To close drawings to capital)
FORMS OF FINANCIAL STATEMENTS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney LO5
FORMS OF FINANCIAL STATEMENTS  continued ,[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Income   XX Less Expenses   XX Profit or Loss   XX Other comprehensive income   XX Total comprehensive income    $ XX STATEMENT OF COMPREHENSIVE INCOME For the month ended 30 September 2010
FORMS OF FINANCIAL STATEMENTS  continued ,[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Income   XX Less Expenses   XX Profit or Loss $ XX INCOME STATEMENT For the month ended 30 September 2010 Profit or Loss   XX Other comprehensive income   XX Total comprehensive income    $ XX STATEMENT OF COMPREHENSIVE INCOME For the month ended 30 September 2010
FORMS OF FINANCIAL STATEMENTS  continued ,[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Income Sales revenue Sales   $480 000 Less:  Sales returns and allowances  $12 000   Sales discounts   8 000   20 000   Net Sales      $ 460 000 SELLERS ELECTRICS Income Statement (partial)
FORMS OF FINANCIAL STATEMENTS  continued ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney LO6 Net sales   $460 000 Less:Ccost of sales     316 000 Gross Profit     $ 144 000 Interest revenue     $ 3 000 Rent revenue     600  Gross profit   $144 000 Other operating income     3 600   147 600 Operating expenses   116 000 Profit     $   31 600
FORMS OF FINANCIAL STATEMENTS  continued ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney SELLERS ELECTRICS Income Statement for the year ended 31 December 2010 (partial)
Simpler ‘nature of expense’ income statement PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Income   Net sales $460 000   Interest revenue   3 000   Rent revenue   400   Discount received   200     Total income   463 600  Expenses   cost of sales $316 000   Selling expenses     76 000   Administrative expenses   38 000   Finance expenses   2 000   Total expenses   432 000 profit $  31 600 SELLERS ELECTRICS Income Statement for the year ended 31 December 2010
Classified statement of financial position PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Assets   Current assets Cash   $  9 500 Accounts Receivable   16 100 Inventory     40 000 Prepaid insurance   1 800   Total current assets   67 400  Property, plant and equipment Shop equipment   $80 000 Less: Accum. depreciation  –  shop equipment   24 000   56 000   Total assets     $123 000 SELLERS ELECTRICS Statement of Financial Position (Partial) as at 31 December 2010
DETERMINING cost of sales  UNDER A PERIODIC SYSTEM PowerPoint presentation by Dr Anne Abraham, University of Western Sydney LO7 Cost of sales Inventory, 1 January     $  36 000 Purchases   $325 000 Less: Purchases returns & allowances  $10 400   Discount received     6 800   17 200 Net purchases     307 800 Add: Freight-in     12 200   Cost of goods produced   320 000 Cost of goods available for sale     356 000 Inventory, 31 December     40 000   cost of sales    $316 000 SELLERS ELECTRICS Cost of sales for the year ended 31 December 2010
APPENDIX 5A PERIODIC INVENTORY SYSTEM ,[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney LO8
Recording purchases of inventory ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 5  Purchases   3 800   Accounts Payable     3 800   (To record goods purchased   on account, terms 2/10, n/30)
Recording purchases of inventory   continued ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 8  Accounts Payable     300   Purchase Returns and Allowances  300   (To record return of defective goods    purchased from Sellers Electrics)
Recording purchases of inventory   continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 9  Freight-in      150   Cash     150   (To record payment of freight,    terms FOB delivery point)
Recording purchases of inventory   continued ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 14  Accounts Payable  ($3800 - $300)     3 500   Discount Received  ($3500 x 0.02)   70    Cash 3 430   (To record payment to Sellers    Electrics within the discount period)
Recording sales of inventory ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 4  Accounts Receivable     3 800   Sales   3 800   (To record credit sales per invoice   no. 731 to Beyer Video)
Recording sales of inventory  continued ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 8  Sales Returns & Allowances     300   Accounts Receivable   300   (To record return of goods from   Beyer Video)
Recording sales of inventory  continued ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Apr 15  Cash   3 430   Sales Discounts  ($3500 x 0.02)   70   Accounts Receivable  ($3800 - $300)     3 500  (To record collection from Sellers  Electrics within discount period)
Comparison of entries: perpetual vs periodic PowerPoint presentation by Dr Anne Abraham, University of Western Sydney TRANSACTION   PERPETUAL  SYSTEM   PERIODIC SYSTEM Apr  4 Purchase of   Inventory  3800   Purchases  3800   inventory on A/C   A/Cs Payable  3800   A/Cs Payable  3800 Apr  8 Purchases  A/Cs Payable  300   A/Cs Payable  300   returns and  Inventory  300   Purchase    allowances     Ret. & Allow.  300   Apr  9 Freight costs on   Freight-in/Inventory  150   Freight-in  150   purchases    Cash     150   Cash   150 Apr 14 Payment on  A/Cs Payable  3500   A/Cs Payable  3500   account with a  Cash   3430   Cash  3430   discount     COS   70   Discount rec ’ d  70 ENTRIES IN BEYER VIDEO’S BOOKS
Comparison of entries: perpetual vs periodic   continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney TRANSACTION   PERPETUAL SYSTEM   PERIODIC  SYSTEM Apr  5 Sales of  A/Cs Receivable  3800   A/Cs Receivable  3800   inventory   on A/C   Sales  3800   Sales  3800   COS  2400   No entry for COS   Inventory  2400 Apr  8 Return of    Sales Returns   Sales Returns    inventory   sold  and Allowances  300   and Allowances  300   A/Cs Receivable  300   A/Cs Receivable  300   Inventory  140   No entry for COS   COS    140 Apr 15 Cash received   Cash  3430   Cash  3430   on account   Sales Discounts  70   Sales Discounts  70   with a discount   A/Cs Receivable  3500   A/Cs Receivable  3500 ENTRIES IN SELLERS ELECTRICS BOOKS
APPENDIX 5B WORKSHEET FOR A RETAIL BUSINESS ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney LO9
WORKSHEET FOR A RETAIL BUSINESS  continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
[object Object],[object Object],[object Object],WORKSHEET FOR A RETAIL BUSINESS  continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
WORKSHEET FOR A RETAIL BUSINESS  continued ,[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
APPENDIX 5C THE GOODS AND SERVICES TAX (GST) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney LO10
GST  continued ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
GST  continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
GST example PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
Accounting for GST ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Inventory     400 GST Paid  (an asset account)       40 Accounts Payable       440   (To record purchase of furniture    from the manufacturer)
Accounting for GST  continued ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Cash       550 GST Collected  (a liability account)       50 Sales         500   (To record sale of furniture to a    customer)
Accounting for GST  continued ,[object Object],[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney GST Collected  (a liability account)     50 GST Paid  (an asset account)   40 Cash       10    (To record payment of GST owing   to taxation authority)
Accounting for GST  continued ,[object Object],[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Cash   60 GST Collected  (a liability account)       100 GST Paid  (an asset account)     160   (To record refund of GST paid from   taxation authority)
Accounting for GST  continued ,[object Object],PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Inventory 400 GST Clearing (GST paid)       40 Accounts payable 440   (To record purchase of furniture from the    manufacturer) Cash 550 GST Clearing (GST collected)     50 Sales 500   (To record sale of furniture to a customer) GST Clearing   10 Cash     10   (To record payment of GST owing  to    taxation authority)
PowerPoint presentation by Dr Anne Abraham, University of Western Sydney

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Retailing

  • 1. Chapter 5 Accounting for retail operations PowerPoint presentation by Dr Anne Abraham University of Western Sydney ©2009 John Wiley & Sons Australia, Ltd
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  • 25. Closing entries illustrated PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Dec 31 Sales 480 000 Profit and Loss Summary 480 000 (To close income statement account with credit balances) 31 Profit and Loss Summary 450 000 Sales Returns and Allowances 12 000 Sales Discounts 8 000 Cost of sales 316 000 Store Salaries Expense 45 000 Administrative Salaries Expense 19 000 Freight-out 7 000 Advertising Expense 16 000 Utilities Expense 17 000 Depreciation Expenses 8 000 Insurance Expense 2 000 (To close income statement accounts with debit balances) 31 Profit and Loss Summary 30 000 RA Lewis, Capital 30 000 (To close profit to capital) 31 RA Lewis, Capital 15 000 RA Lewis, Drawings 15 000 (To close drawings to capital)
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  • 33. Simpler ‘nature of expense’ income statement PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Income Net sales $460 000 Interest revenue 3 000 Rent revenue 400 Discount received 200 Total income 463 600 Expenses cost of sales $316 000 Selling expenses 76 000 Administrative expenses 38 000 Finance expenses 2 000 Total expenses 432 000 profit $ 31 600 SELLERS ELECTRICS Income Statement for the year ended 31 December 2010
  • 34. Classified statement of financial position PowerPoint presentation by Dr Anne Abraham, University of Western Sydney Assets Current assets Cash $ 9 500 Accounts Receivable 16 100 Inventory 40 000 Prepaid insurance 1 800 Total current assets 67 400 Property, plant and equipment Shop equipment $80 000 Less: Accum. depreciation – shop equipment 24 000 56 000 Total assets $123 000 SELLERS ELECTRICS Statement of Financial Position (Partial) as at 31 December 2010
  • 35. DETERMINING cost of sales UNDER A PERIODIC SYSTEM PowerPoint presentation by Dr Anne Abraham, University of Western Sydney LO7 Cost of sales Inventory, 1 January $ 36 000 Purchases $325 000 Less: Purchases returns & allowances $10 400 Discount received 6 800 17 200 Net purchases 307 800 Add: Freight-in 12 200 Cost of goods produced 320 000 Cost of goods available for sale 356 000 Inventory, 31 December 40 000 cost of sales $316 000 SELLERS ELECTRICS Cost of sales for the year ended 31 December 2010
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  • 44. Comparison of entries: perpetual vs periodic PowerPoint presentation by Dr Anne Abraham, University of Western Sydney TRANSACTION PERPETUAL SYSTEM PERIODIC SYSTEM Apr 4 Purchase of Inventory 3800 Purchases 3800 inventory on A/C A/Cs Payable 3800 A/Cs Payable 3800 Apr 8 Purchases A/Cs Payable 300 A/Cs Payable 300 returns and Inventory 300 Purchase allowances Ret. & Allow. 300 Apr 9 Freight costs on Freight-in/Inventory 150 Freight-in 150 purchases Cash 150 Cash 150 Apr 14 Payment on A/Cs Payable 3500 A/Cs Payable 3500 account with a Cash 3430 Cash 3430 discount COS 70 Discount rec ’ d 70 ENTRIES IN BEYER VIDEO’S BOOKS
  • 45. Comparison of entries: perpetual vs periodic continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney TRANSACTION PERPETUAL SYSTEM PERIODIC SYSTEM Apr 5 Sales of A/Cs Receivable 3800 A/Cs Receivable 3800 inventory on A/C Sales 3800 Sales 3800 COS 2400 No entry for COS Inventory 2400 Apr 8 Return of Sales Returns Sales Returns inventory sold and Allowances 300 and Allowances 300 A/Cs Receivable 300 A/Cs Receivable 300 Inventory 140 No entry for COS COS 140 Apr 15 Cash received Cash 3430 Cash 3430 on account Sales Discounts 70 Sales Discounts 70 with a discount A/Cs Receivable 3500 A/Cs Receivable 3500 ENTRIES IN SELLERS ELECTRICS BOOKS
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  • 52. GST continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
  • 53. GST example PowerPoint presentation by Dr Anne Abraham, University of Western Sydney
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  • 59. PowerPoint presentation by Dr Anne Abraham, University of Western Sydney