Recording-2025-03-03T22:38:33.901Z

Differences Between Service and Merchandising

• Net Sales Revenue Calculation

  • Derived from gross sales (wholesales)

  • Subtracts discounts and returns:

    • Sales Returns: Customer returns of purchased goods

    • Sales Allowances: Discounts provided instead of returns, when customers report issues with items

Understanding Inventory and Cost of Goods Sold

• Cost of Goods Sold: Represents goods available for sale, which can either be sold or become ending inventory.

• Inventory Management Systems:

  • Perpetual System:

    • Inventory updates in real-time

    • Reflects every transaction that affects inventory (sales, purchases, returns)

    • Useful for maintaining up-to-date records and stock levels, e.g., scanning at retail stores.

• Examples of Costs Associated with Inventory:

  • Shipping costs (e.g., hiring a truck at $400 raises inventory costs)

  • Always add costs that facilitate getting products to sellable condition to inventory.

Discounts and Payment Calculations

• Calculating discounts based on sales:

  • Example:

    • Total Amount Owed: $10,000

    • Discount Offered: 2%

    • Calculation:

      • $10,000 x 0.02 = $200 discount

      • Final Payment: $10,000 - $200 = $9,800

Reporting Financials

• Understanding Financial Statements:

  • Fiscal Year Report Example:

    • Cost of Goods Sold reported as $571,011,000 (in millions)

    • Ending inventory current year: $3,195,900

    • Previous year's ending inventory: $3,641,000

• Shrinkage Calculation:

  • Compare expected inventory (beginning balance + purchases) to actual counted inventory.

    • Example figures:

      • Expected Inventory: $3,355.09

      • Actual Counted Inventory: $3,259
        - Shrinkage: $3,355.09 - $3,259 = $96.09
        

Managing Accounts Payable and Discounts

• Understanding Purchases and Discounts:

  • Merchandise cost begins at $23,000

  • After applying discounts, final payable amount may be reduced (Example: $21.36 payable).

• Importance of Perspective:

  • Recognize the difference between being the buyer and seller in transactions to avoid errors in accounting practices.

Sales Transactions

• Sales and Allowances:

  • Example Sales Amount: $3,000

  • Discount on Sales:

    • If discount is 2%, apply to sales amount: $3,000 x 0.02 = $60 discount

    • Final effective sales revenue will reflect adjustments for discounts or allowances.