Accounting Test 2 Chapter 5

A merchandiser is a business that sells merchandise, or goods, to consumers.

Purchase of merchandise inventory: Merchandise Inventory Cash or A/P Purchase return: Cash or A/P Merchandise Inventory Payment of freight in: Merchandise Inventory Cash Payment within discount period: A/P Cash Merchandise Inventory Payment after discount period: A/P Cash

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An adjusting entry must be made for inventory shrinkage, the loss of inventory that occurs because of theft, damage, and errors. The closing entries are similar to those already learned, except for including the new accounts (Sales Revenue, Sales Returns and Allowances, Sales Discounts, and Cost of Goods Sold).

Single-Step Income Statement Multi-Step Income Statement A merchandiser's statement of retained earnings looks exactly like that of a service business. The balance sheet will also look the same, except merchandisers have an additional current asset, Merchandise Inventory.

Gross Profit Percentage= Gross Profit/ Net sales revenue.

Cost of Goods Sold, Merchandise Inventory, Sales Revenue

Perpetual and Periodic

Merchandise Inventory DR Accounts Payable CR

Cost of Goods Sold

Gross Profit, Operating Income, Net Income, Other Revenues and Expenses.