Chart of Accounts Merchandising Company

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Nature of Merchandising Business
• Revenue activities of a merchandising business involve the buying and selling of merchandise. They purchase merchandise which is resold to customers. • Comparison to Service Business

|Service Business |Merchandising Business | |Fees earned |Sales | |Less Operating expenses |Less Cost of merchandise sold | |=Net income |=Gross Profit | | |Less Operating expenses | | |=Net Income |

• New Accounts on the Income Statement
o SALES – revenues collected from the sale of merchandise o COST OF MERCHANDISE SOLD – the purchase price plus incidentals of merchandise available for resale o GROSS PROFIT – Sales – COMS

INCOME STATEMENT

Gem City Music

Income Statement

For the Year Ended December 31, 20—

Revenue from sales:
Sales $189,300
Less:Sales returns and allowances$1,700
Sales discounts5002,200
Net sales $187,100
Cost of merchandise sold XXXX100,000
Gross profit $87,100
Operating expenses:
Selling expenses:
Sales salaries expense$17,700
Administrative expenses:
Rent expense$ 7,800
Office salaries expense 22,550
Depreciation expense—office equipment 2,800 33,150
Total operating expenses50,850
Income from operations$36,250
Other expense:
Interest expense2,000
Net income$34,250

XXXX
Computation of Cost of Merchandise Sold
Purchases
Less merchandise inventory, December 31
=Cost of merchandise sold

Computation of Cost of Merchandise Purchased
Purchases
Less: purchases returns and allowances
Less: purchases discount
=Net purchases
Add: transportation in
=Cost of merchandise purchased

• New Accounts on the Balance Sheet
o Merchandise inventory – merchandise on hand at the end of an accounting period.

Merchandising Transactions

Chart of Accounts for Merchandising Business

|Assets | | | |Cash | | |Accounts receivable | | |Merchandise inventory | | |Office Supplies | | |Prepaid Insurance | | |Store Equipment | | |Acc. Depreciation | | |Office Equipment | | |Acc. Depreciation | |Liabilities | | |...
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