Meigs

1
Chapter 09
Financial Statements for merchandizing
businesses ????????
2
The Accounting Cycle
Make end-of-year adjustments.
Prepare trial balance.
Prepare financial statements.
Journalize and post closing entries.
Prepare adjusted trial balance.
Prepare after closing trial balance.
3
Classified Statements
Classified Balance Sheet
Classified Income Statement
4
Classified Income Statement
An income statement can be prepared in either a
multiple-step or single-step format.
The single-step format (???) is simpler. The
multiple-step format provides more detailed
information in which different items of revenue
and expense are classified into significant
groups.
5
Income Statement (Single-Step) Example



6
Classified (multiple-step)??? Income Statement
Exh. 4.4
Net Sales Section Sales
- sales Returns and
Allowances -Sales Discount
Net Sale

Operating Expenses Section Selling Expense
General and Administrative
Expense
Depreciation Expense Wages Expense
. Total Expenses

Cost of GOOD Sold Section Beginning
Merchandize Inventory Net Purchase
-Ending Merchandize
Inventory Cost of Good Sold

7
Income Statement (Multiple-Step) Example
Revenue form Sales
Cost of Good Sold
Operating Expenses
8
Gross Profit Rate ???
Used by investors to evaluate the Profitability
with each dollar sale.
Gross profit rate
9
Inventory Turnover Rate ?????
Measures how quickly a company sells its
merchandise inventory.
Avg. Inventory (Beg. Inv. End. Inv.) 2
A ratio that is low compared to competitors
suggests inefficient use of assets.
10
Return On Investment (ROI)?????
Used by investors to evaluate the efficiency with
which financial resources are employed.
(Beginning Capital Ending Capital)/2
11
13-11
12
13-12
13
Working Capital????
Working capital is the excess of current assets
over current liabilities.
14
Current Ratio ????

1.55 1
15
The Accounting Cycle
Make end-of-year adjustments.
Prepare trial balance.
Prepare financial statements.
Journalize and post closing entries.
Prepare adjusted trial balance.
Prepare after closing trial balance.
16
Special Closing entry for Merchandizing Business
Revenue
Income Summary
Bal
closing

• Sales

Dr
Cr
Bal
closing
Sales Returns and Allowances
Bal
closing
Sales Discount
Bal
closing
17
Special Closing entry for Merchandizing Business
Expenses
Income Summary
Bal
closing

• Purchases

Dr
Cr
Bal
closing
Purchases Returns and Allowances
closing
Bal
Purchases Discount
closing
Bal
18

• Assignment
• Problem (3) Self comprehensive
• Problems II on page 237