In the first four lessons, we followed a small service company through an entire accounting cycle. MM TAX completed the following tasks during the month of December:
In the following four lessons, we will expand upon the basics previously learned.
The first four lessons focused on a service-type businesses. We will now enter the world of merchandising, in which businesses purchase goods (merchandise) from a wholesaler or manufacturer and generate revenue from selling those goods to customers. While a merchandiser has operating and administrative expenses similar to those of a service business, it also has expenses related to the cost of the goods it purchases. Cost of goods (merchandise) sold is the major expense for a merchandiser. Merchandise inventory—merchandise that has not yet been sold—is an important asset for a merchandiser.
In this lesson, you will learn new terms and concepts that relate to a merchandise business and its inventory. You will use the accounting concepts learned in previous lessons to record merchandising transactions. We will learn the different methods that merchandisers use to determine the cost of ending inventory and will prepare a multistep income statement. In the multistep income statement, you will learn how to determine net sales, cost of goods sold, merchandise inventory, gross profit, and net income.
After completing this lesson, you should be able to do the following things:
By the end of this lesson, make sure you have completed the readings and activities found in the Lesson 5 Course Schedule.