Lesson: 40

Topic: Exploring the Worksheet for a Merchandising Firm

Objectives:

Once we have taken up last day's problem, we will then analyze the worksheet for a merchandising firm. Students will examine how the beginning value of the inventory account is debited on the Income Statement to show that it has flowed out of the business, while the ending value of the inventory account is credited on the Income Statement to show that it has flowed into the business. 

Students will also note how "Freight-in" and "Purchases" are added to the expense accounts of the business, and are thus debited to the Income Statement. 

Method of Instruction and Evaluation Exercise:

The class will examine a spreadsheet which illustrates the how a "Periodic" inventory system would be maintained within a worksheet.

After a brief discussion of the concepts outlined within the presentation, students will complete exercise #1 on page 441, parts A and D only.

Expectations Addressed:

The "Advanced Accounting Practices" strand of the BAF3M Ministry of Education Curriculum Guidelines outlines all of the following specific expectations. The expectations addressed by this lesson have been highlighted below.

• The Accounting Cycle for a Merchandising Business:
  • describe the principal accounting elements particular to a merchandising business (e.g., new accounts, cost of goods sold section, returns, discounts);
  • identify and describe the periodic and perpetual inventory systems and journalize transactions using both systems;
  • assess the effects that transactions have on the accounts and financial statements of a merchandising business;
  • record transactions in the journals and ledgers of a merchandising business;
  • prepare a trial balance and the financial statements, including a detailed cost of goods sold section, for a merchandising business;
  • record the adjusting and closing entries for a merchandising business (e.g., accruals, inventory adjustment);
  • describe the impact of year-end procedures, including adjusting and closing entries, on the financial statements of a merchandising business;
  • describe alternative accounting practices (e.g., special journals and ledgers).
• Accounting for Sales Tax:
  • describe the accounting practices particular to sales tax (e.g., accounts required, financial statement presentation);
  • record transactions related to provincial sales tax (e.g., collections, remittance);
  • record transactions related to federal sales tax (e.g., collections, remittance).
• Computer Applications in Accounting:
  • use accounting or application software to record transactions for a service business;
  • use accounting or application software to record transactions for a merchandising business;
  • use accounting or application software to prepare financial statements.

References:

• Text, chapter #11, pages 435 - 441.
• Power Point Presentation: Exploring the Periodic System’s Worksheet