Financial Accounting: An Integrated Statements Approach, 2nd Edition

SALES TRANSACTIONS

In the remainder of this chapter, we illustrate transactions that affect the financial state-

ments of a merchandising business. These transactions affect the reporting of net sales,

cost of merchandise sold, gross profit, and merchandise inventory.

Sales of merchandise are recorded in a journal and posted to the accounts in a

ledger, using the rules of debit and credit that we illustrated in Chapter 4. The only

difference between the illustrations in Chapter 4 and those in this chapter is that we

220 Chapter 5 Accounting for Merchandise Operations

Exhibit 9

Integrated Financial Statements for Online Solutions

Describe the accounting

for the sale of

merchandise.

3

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Balance Sheet

December 31, 2010

Assets  Liabilities  Stockholders’ Equity

Accts. Accts. Notes Salaries Capital Retained

Cash Rec. • • • Pay. Pay. Pay. • • •Stock Earnings

•••••• •

•••••• •

•••••• •

$52,950 $76,0 80 $22,420 $25,000 $1,140 $25,000 $171,200

$246,560 $246,560

Total Assets  Total Liabilities Stockholders’ Equity

⎭⎪⎪⎪⎬⎪⎪⎪⎫ ⎭⎪⎪⎪⎪⎪⎪⎪⎪⎪⎪⎪⎬⎪⎪⎪⎪⎪⎪⎪⎪⎪⎪⎪⎫

Reconciliation

of cash flows from operations

and net income (see appendix

to this chapter)

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Statement of Cash Flows

For the Year Ended Dec. 31, 2010

Operating act. $ 47,120

Investing act. (12,670)

Financing act. (23,000)

Increase in cash $ 11,450

Cash, Jan. 1 41,500

Cash, Dec. 31 $ 52,950

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Income Statement

For the Year Ended Dec. 31, 2010

Revenue $70 8 ,255

Expenses 647, 855

Net income $ 60,400

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Retained Earnings Statement

For the Year Ended Dec. 31, 2010

Retained Earnings,

Jan. 1 $12 8 , 800

Net income 60,400

Dividends (1 8 ,000)

Retained Earnings,

Dec. 31 $171,200