会计英语(第四版)(叶建芳)05

On July 15, Play Clothes pays the full amount due to Kid’s Clothes.
Prepare the journal entry for Play Clothes.
credit terms are stated in the invoice.
2/10, n/30
Read as: “Two ten, net thirty”
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Credit Terms and Cash Discounts
2/10, n/30
Percentage of Discount
• Record discount when taken.
• Net of discount
• Charge discounts not taken when paid.
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Terminology
Purchase = receipt of merchandise not to placing of a purchase order.
• Tangible items that will be consumed in the course of normal operations.
• e.g., office supplies, lubricants, repair parts.
• Not sold and not accounted for as part of cost of goods sold.
• 3 types of inventories;
• Materials. • Work-in-process. • Finished goods.
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Types of Companies/Inventories (Cont.)
• Service organizations (hotels, beauty parlors, plumbers)
• Making goods ready for sale. ( unpacking and marking)
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Methods of Accounting for Purchase (or cash) Discounts
• Record at invoice price( in china)
• Intangible inventory costs are costs incurred for client but not yet billed called jobs-in-progress or unbilled costs.
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Supplies
2 approaches:
Periodic inventory method. Perpetual inventory method.
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Periodic Inventory Method
• Determine amount of ending inventory and deduce costs of goods sold.
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Types of Companies
Merchandising company
Sells goods in same form as acquired.
Manufacturing company
Converts raw material into finished goods.
• May have materials inventories.
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Types of Companies/Inventories (Cont.)
• Professional service firms (accounting firms, legal firms)
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Recording Purchases at Gross Invoice Price
On July 6, Play Clothes purchased $4,000 of merchandise on credit with terms of 2/10, n/30 from Kid’s Clothes.
# of Days Discount Is
Available
Otherwise, the Full
Amount Is Due
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# of Days when Full Amount Is
Due
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Recording Purchases at Gross Invoice Price
• Net purchases = gross purchases -purchase returns and allowances + freight-in
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Measurement Issue
Dividing goods available for sale between COGS and End. Inventory.
• Detailed record is useful. • Built in check. • Identifies shrinkage by item. • Income statement can be prepared without taking a
physical inventory.
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Service company
Provides intangible services.
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Types of Companies/Inventories
Merchandising
Sells goods in same form in which they are acquired.
On July 6, Play Clothes purchased $4,000 of merchandise on credit with terms of 2/10, n/30 from Kid’s Clothes.
Prepare the journal entry for Play Clothes.
• Inventory costs (and costs of goods sold) = acquisition costs.
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Types of Companies/Inventories (Cont.)
• Manufacturing company converts raw materials and purchased parts into finished goods.
• Count inventory (i.e., a physical inventory is taken) at the end of the period.
• Multiply count times cost for each item to determine total amount of inventory.
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Account for the purchase
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Credit Terms and Cash Discounts
When manufacturers and wholesalers sell their products on account, the
Gross Method
Purchases are recorded at their gross amounts.
Purchase
discounts taken
are recorded
when payment
is made inside
the discount
period. YE SUN AccountingEnglish
• Usually title transfers when good point).
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Relationship of Inventory and Cost of Goods Sold
• Beginning inventory + net purchases = goods available for sale
• Measure amount actually delivered to customers; deduce ending inventory.
• Perpetual inventory record is kept for each item in the inventory.
• Advantages of perpetual inventory method:
• Goods available for sale = cost of goods sold + ending inventory.
• Equivalently: Beg. inventory + net purchases -ending inventory = cost of goods sold.
GENERAL JOURNAL
Date
Account Titles and Explanation
July 6 Inventory
Accounts Payable (Kid's Clothes)
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Debit 4,000
Credit 4,000
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Recording Purchases at Gross Invoice Price
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Inventories Definition
• Asset items held for sale in the ordinary course of business or goods that will be used or consumed in the production of goods to be sold.
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Merchandise Inventory
• Inventories accounted for at cost.
• Cost includes cost of
• Acquiring merchandise (invoice cost of goods, freight-in)
Prepare the journal entry for Play Clothes.
GENERAL JOURNAL
Date
Account Titles and Explanation
Debit Credit
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Recording Purchases at Gross Invoice Price
Lesson 5
Inventory and Cost of Goods Sales
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Inventory Issues
What is inventory? What costs are included in inventory? How do we separate COGS from End. Inv?
• Beginning inventory of current period = ending inventory of preceding period.
• COGS = COGA - End. Inventory
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Perpetual Inventory Method