Merchandising

• Parts of an Income Statement?

  * Revenue from Sales

  * Cost of Goods Sold

  * Gross Margin from Sales

  * Operating Expenses

  * Net Income/Loss
• Sales Invoice


  The document prepared by the seller of the merchandise
• Official Receipt


  Document prepared by the seller of the service
• Sales


  A revenue account used for recording sales whether the sale is made on cash or account
• List Price or Catalog Price


  Full price of the item without taking discounts or special offers
• Trade Discount


  Percentage reduction from a list price
• Credit Memorandum


  Issued as evidence of sales return or salles allowance granted
• Cash Discount


  Given if payments are received within a certain number of days from the date of sale
• 2/10, 1/15, n/30


  Buyer may deduct 2% from the amount due if payment is made in 10 days, 1% if payment is made within 11 to 15 days. Full amount will be due if payment is made within 16-30 days.
• EOM = End of Month
• Purchases


  Account debited for the cost of goods purchased
• Debit Memorandum


  Issued by the purchaser as evidence of purchase returns.
• Freight In


  Also called Transportation In
• Freight In


  The account used to record freight costs incurred by the buyer. Is in the cost of goods part of the income statement.
• Freight Out


  Account used to record shipping costs shouldered by the seller. Also called Delivery Expense.
• FOB = Free on Board
• FOB Shipping Point


  Buyer agrees to shoulder transportation costs from the point of shipment up until point of destination.
• Buyer receives the title of goods at the shipping point in FOB Shipping Point
• FOB Destination


  Seller shoulders transportation costs from the point of shipment until point of destination.
• Buyer receives title of goods at the point of destination during FOB Destination
• Freight Prepaid


  Seller pays for transportation at the time of shipment.
• Freight Collect


  Buyer pays the transportation costs upon the receipt of goods at the place of destination.
• Cost of Goods Sold:

  Merchandise Inventory, Beginning

  Add: Purchases, Freight In

  Total

  Less: Purchase Returns and Allowances, Purchase Discount

  Net Purchases

  Total COGS Available for Sale

  Less: Merchandise Inventory, Ending

  Cost of Goods Sold
• First column of Income Statement:

  1. Revenue from Sales
  2. Net Sales
  3. Cost of Goods Sold
  4. Gross Profit
  5. Other Income
  6. Total Revenue
• Second column of Income Statement:

  1. Less: Sales Discount, SRA
  2. Merchandise Inventories
  3. Net Purchases
  4. Total Cost of Goods Available for Sale
• Third column of Income Statement:

  1. Add: Purchases, Freight In
  2. Total
  3. Operating Expenses