Accounting for Merchandising Businesses

Nature of Businesses
Service Business
Fees earned Operating expenses Net income Rs.XXX XXX Rs.XXX

Nature of Businesses
Merchandising Business
Sales Cost of Merchandise Sold Gross Profit Operating Expenses Net Income Rs. XXX XXX Rs. XXX XXX Rs.XXX

Cost of Merchandise Purchased

Purchases Less: Purchase returns and allowances Purchase discounts Net purchases Add Freight-in Cost of goods purchased

Cost of Goods Sold

Opening Stock Purchases Less: Purchase returns and allowances Purchase discounts Net purchases Add transportation-in Cost of goods purchased Goods available for sale Less Closing Stock Cost of goods sold

Single-Step Income Statement for a Merchandising Business

Income Statement For the Year Ended

Revenues: Net sales Rent revenue Total revenues Expenses: Cost of merchandise sold Selling expenses Administrative expenses Interest expense Total expenses
Net income

Multiple-Step Income Statement

Income Statement For the Year Ended

Revenue from sales: Sales Less:Sales returns and allowances Sales discounts Net sales Cost of goods sold Gross profit

Continued

Operating expenses: Selling expenses: Sales salaries expense Advertising expense Depr. Expensestore equipment Miscellaneous selling expense Total selling expenses Administrative expenses: Office salaries expense Rent expense Depr. expenseoffice equipment Insurance expense Office supplies expense Misc. administrative expense Total admin. expenses Total operating expenses Income from operations

Continued

Other income and expenses: Rent revenue Interest expense Net income

Concluded

Retained Earnings Statement

Retained Earnings Statement

Retained earnings Net income for year Less dividends Increase in owners equity Retained earnings

Balance Sheet

NetSolutions Balance Sheet December 31, 2007

Assets
Current assets: Cash Accounts receivable Merchandise inventory Office supplies Prepaid insurance Total current assets 52,950 91,080 62,150 480 2,650 209,310

Continued

Property, plant, and equipment: Land Store equipment Less accumulated depreciation Office equipment Less accumulated depreciation Total property, plant, and equipment Total assets

20,000 27,100 5,700 15,570 4,720 21,400

10,850 52,250 261,560

Continued

Liabilities Current liabilities: Accounts payable Note payable (current portion) Salaries payable Unearned rent Total current liabilities Long-term liabilities: Note payable (due 2017) Total liabilities Stockholders Equity Capital stock Retained earnings Total liab. and stockholders equity 22,420 5,000 1,140 1,800 30,360 20,000 50,360 25,000 186,200

211,200 261,560