Lesson: 44

Topic: Application of Merchandising Theory

Objectives:

Students will have the opportunity to apply the theory learned in the last few classes to a number of application exercises.

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.

Application Exercises:

• exercise #3 on page 429 in your text;
• exercise #1 on page 433;
• Journalizing Transactions and Closing Entries within Periodic and Perpetual Systems;
• The Merchandising Income Statement
• 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: The Mystery of Periodic Inventory.