The McGraw-Hill Companies, Inc., 2003McGraw-Hill/IrwinSlide 6-1MERCHANDISING ACTIVITIESChapter6 The McGraw-Hill Companies, Inc., 2003McGraw-Hill/IrwinSlide 6-2Operating Cycle of a Merchandising CompanyOperating Cycle of a Merchandising Company1. Purchase of merchandise3. Collection of the receivables2. Sale of merchandise on accountCashInventoryAccounts Receivable The McGraw-Hill Companies, Inc., 2003McGraw-Hill/IrwinSlide 6-3Comparing Merchandising Activities with Manufacturing ActivitiesComparing Merchandising Activities with Manufacturing ActivitiesMerchandising ComanyPurchase inventory in ready!to!sell condition.Manufacturing ComanyManufacture inventory and have a longer and more comle" oerating cycle. The McGraw-Hill Companies, Inc., 2003McGraw-Hill/IrwinSlide 6-4Retailers and WholesalersRetailers and WholesalersRetailers sell merchandise directly to the ublic.#holesalers buy merchandise from several different manufacturers and then sell this merchandise to several retailers. The McGraw-Hill Companies, Inc., 2003McGraw-Hill/IrwinSlide 6-5Income Statement of a Merchandising CompanyIncome Statement of a Merchandising CompanyComuter CityCondensed Income Statement$or the %ear &nded 'ecember 31( 2))2Revenue from sales *))())) +,ess-Cost of goods sold ./)()))0ross rofit 31)())) +,ess-&"enses 22)()))3et income *)())) +Cost of goods sold reresents the e"ense of goods that are sold to customers.0ross rofit is a useful means of measuring the rofitability of sales transactions. The McGraw-Hill Companies, Inc., 2003McGraw-Hill/IrwinSlide 6-6What Accounting Information Does a Merchandising Company eed!What Accounting Information Does a Merchandising Company eed!$inancial Reorting Re4uirements'aily 5usiness 6erating Re4uirementsSecial Reorting Re4uirements&"amles Revenues &"enses Customer ,edgers7a" Reorts The McGraw-Hill Companies, Inc., 2003McGraw-Hill/IrwinSlide 6-7"eneral #edger Accounts"eneral #edger Accounts0eneral ,edgerAccounts Receivable'ate 'ebit Credit 5alance2))18une 11)())) 1)()))1. 3()))2())) Although general ledger accounts rovide useful information( they do not rovide much of the detailed information needed in the daily business oerations.#ho o9es us money:#ho o9es us money: The McGraw-Hill Companies, Inc., 2003McGraw-Hill/IrwinSlide 6-8Su$sidiary #edgers%A Source of eeded DetailsSu$sidiary #edgers%A Source of eeded DetailsSubsidiary ,edger;eather 8acobs'ate 'ebit Credit 5alance2))18une 12()))2())) 1. 2())).())) 0eneral ,edgerAccounts Receivable'ate 'ebit Credit 5alance2))18une 11)())) 1)()))1. 3()))2())) Subsidiary ,edger8a