Вы находитесь на странице: 1из 36

AKW104 Accounting & Finance

Lecture 3
Dr. Cheah Soo Jin
School of Management
1

The following students have registered


under the wrong code
AKW 104 is a MINOR (Code M) course

It is NOT an Elective (Code E) or University


Course (Code U).
Please re-submit your registration form
immediately.

Name of students who need to resubmit their registration forms

Aina Syazawani Binti Ahmad Zaki 128294


Chan Lik Hao 128752
Christine Lim Xin Yi 128310
Fatin Syahirah Binti Mod Asrore 127220
Hoong Shu Yan 128328
Ku Noor Khalidah Binti Ku Halim 127165
Lai Ying Hui 128332
3

Students who have to re-submit their


registration forms

Law Ying Cheng 124832


Lim Hooi Mei 128337
Marziah binti Yahya 126085
Mastura Binti Roslan 126152
Najihah Karimah Bt Ab Rahim 130069
Nor Zahirah Binti Norafand 131584
Norazhar bin Norazman Teh 128362
4

Students who have to re-submit their


registration forms

Nur Adilah Bt Che Mud 130446


Nurul Mashitah Binti Ramly 127358
Nurul Nazirah Binti Kamarudin 127018
Ooi Lim Seong Liang 128381
Pang Chee Hoo 128382
Syahirah Binti Misban 128395
Tan Chong Gee 128399
Theram Singh Sidhu Brar 128406
5

Chapter 3
MERCHANDISING TRANSACTIONS &
INVENTORIES

Operating cycle of merchandising


business

Sales

Purchasing
Collections

Merchandising companies

Retailers
sell direct to consumers
e.g. TESCO, Parkson, SengQ

Wholesalers
buy from manufacturers in large quantity
& sell to retailers in smaller quantity

Sales Transactions
Cash Sales
Dr. Cash
Cr. Sales/Sales Revenue
Credit Sales
Dr. Accounts Receivable/Debtor
Cr. Sales/Sales Revenue

The difference between a Cash


Discount and a Trade Discount
Cash Discount (also known as Sales Discount)
- is given to encourage prompt payment
- it is deducted from Invoice Price.
Trade Discount (incl. Quantity Discount)
- is given to encourage customers to buy
in big quantity
- It is deducted from the List Price.
10

Accounting records for discounts


Cash Discount
Dr. Account Receivable
Cr. Cash Discount

Trade Discount
No special book entries are required, because
the Sales Invoice will show the Net Sales Value after
deducting trade discount from the List Price.
11

Sales Returns & Allowances


Sales Returns are goods returned by customers
(due to: product defect, or
wrong specifications)
Accounting entries:Dr. Sales Returns & Allowance
Cr. Accounts Receivable
Effects:Both Sales Revenue & Accounts Receivable
will be reduced
12

Net Sales
Sales Revenue after minus discounts &
allowances is called Net Sales.
What is the difference between GROSS Sales
and NET Sales ?

13

Purchasing Activity
Purchase of goods for use :
- It is classified as Non-Current Asset
- e.g. Machine, Equipment, Furniture etc.

Purchase of goods for re-sale :


- It is known as Inventory or Stock
- It is classified as Current Asset

14

Purchase of Goods for Re-sale


Book Entries:
Dr. Inventory
Cr. Accounts Payable/Creditor

When the transport cost of the goods


purchased is paid by the company; it
constitutes part of the cost of the goods
purchased. It should thus be added to the
inventory.
15

Transport cost of the purchase


It is also known as Shipping charges,
Transport Expense, Freight-In, or
Carriage Inwards.

The Book Entries:


Dr. Inventory
Cr. Shipping Charges
16

GST on goods purchased


Example:
Credit Purchase
GST paid (6% of RM400)
Total amount payable
Book Entries:
Dr. Inventory
RM400
Dr. GST
24
Cr. Accounts Payable

RM400
RM 24
RM424

RM424
17

Goods-In-Transit

Who owns the goods?


The Buyer or the Seller?
18

Goods-in-transit
Ownership depends on who owns the legal rights
to the goods.
How do we know?
The terms of sales: FOB (Free on Board)

Ex-Warehouse/Ex-Factory
CNF (Cost & Freight)
CIF (Cost, Insurance &
Freight)
Delivered
19

Consigned Goods
Consigned goods is known as Consignment.

Principal -> Agent -> Customer


Principal remains the Owner of the consigned
goods until they are sold by the Agent to the
Customer.

20

Cost of Goods Sold


Also known as Cost of Sales
Includes: Purchase price of the goods and
additional cost to bring the goods
into Inventory.

21

The 2 systems compared


Periodic Inventory System

Perpetual Inventory System

Purchases

Dr. Purchases A/c


Cr. Accounts Payable

Dr. Inventory A/c


Cr. Accounts Payable

Sales RM100
(Cost of
Sales=
RM90)

Dr. Accounts Receivable


Cr. Sales A/c

Cost of Goods
Sold

Calculate separately
Beginning Inventory xxx
Purchases
xx
xx
Less: Ending Inventory xx
Cost of Goods Sold
xxx

Inventory
Balance

Beginning Balance remain the same Balance is continuously updated


until adjustment at year-end

RM100
RM100

Dr.
Cr.
Dr.
Cr.

Cost of Good Sold A/c RM90


Inventory A/c
RM90
A/c Receivable
RM100
Sales
RM100

All sales transactions are


continuously recorded during
the accounting period.

22

Income Statement
It can also be called Profit and Loss Statement
It is usually prepared to determine the business
performance for a certain fiscal period, e.g.
monthly, quarterly or yearly.

Please refer to Page 65 for an example of the


Income Statement.
Please take note that the statement states that the
Income Statement is for the year ended 31
December, 2015. In order words, it shows the
performance for the whole of 2015.
23

Inventory Systems
Merchandising companies may use either one of
the following two inventory costing systems:1) Perpetual Inventory System
2) Periodic Inventory System

24

Example for Periodic Inventory


Systems
Date

Jan 01

Total (RM)

Beginning Inventory

150 units @ RM10

1,500

10

Purchases

900 units @ RM10

9,000

18

Sales

700 units @ RM15

10,500

31

Ending Inventory

350 units @ RM10

3,500

We shall use the above data to compare the Periodic Inventory System with
the Perpetual Inventory System

25

Periodic Inventory System Ledger


Accounts
Purchases A/c
Date
Jan 10

Dr
Bank

Cr

9,000

Balance
9,000

Sales A/c

Jan 18

Bank

10,500

10,500

Inventory A/c
Jan 01

Beginning Balance

31

Transfer to Income Statement

31

Ending Balance

1,500

1,500
1,500

3,500

0
3,500
26

How to calculate Cost of Goods Sold


Beginning Inventory
+ Purchases
Goods available for sales
Less: Ending Inventory
Cost of Goods Sold

RM 1,500
9,000
10,500
3,500
7,000

27

Example for Perpetual Inventory System- Ledger


Accounts
Inventory A/c
Date

Jan 01

Dr

Cr

Balance

Beginning Inventory

1500

1500

10

Bank

9000

10500

18

Cost of goods sold

7000

3500

10500

10500

Sales A/c
Jan 18

Bank

Cost of Goods Sold A/c


Jan 18

Inventory

7000

7000

28

Determining Inventory Quantities


This is done by Physical Stock Count

Stock count is usually done at the end of a fiscal period


29

Methods of valuing inventory


Weighted-average cost

First-in, first-out (FIFO)


Last-in, first-out (LIFO)
LIFO Method is normally not accepted by the
Inland Revenue Board
30

Weighted-Average Cost
Quantity (Units)

Unit Price (RM)

Amount (RM)

Opening Inventory

150

100

15,000

Purchases

400

120

48,000

Purchases

500

150

75,000

Total available for


sales

1,050

131.43

138,000

Closing Inventory

350

131.43

(46,000)

Cost of Sales

700

131.43

92,000

Weighted Average Cost = RM138,000/1,050 = RM131.43 per unit

31

FIFO
FIFO method assumed the first items purchased
are the first one sold.
Example
Jan 1 Purchased 150 units @ RM10 each
2 Purchased 110 units @ RM12 each
3 Sold 100 units (cost RM10x100 = RM1,000)
4 Sold 100 units (cost is calculated as follows)
50 units x RM10
= RM 500
50 units x RM12
= RM 600
Total Cost of Goods Sold= RM1,100
32

LIFO
LIFO assumes the most recently purchased items are
sold first.
Example
Jan 1 Purchased 150 units @ RM10 each
2 Purchased 110 units @ RM12 each
3 Sold 100 units (cost =RM12 x100 = RM1,200)
4 Sold 100 units (cost based on LIFO is as follows
10 units x RM12
= RM 120
90 units x RM10
= RM 900
Total Cost of Goods Sold= RM1,020
33

Taking a physical stock count


Segregation of duties & Authorization:

- storekeeper should NOT be the

Counter or the Verifier

- Counter

- Verifier
Using stock tickets for counting purpose
Tally Sheets preferably done by Accounting
personnel
34

Valuation of Inventory
In case of uncertainty like obsolescence, over
supply, defects, or major price declines, the
inventory should be valued basing on the
principle of :
Lower of Cost and Net Realisable Value
Cost = cost of purchase
Net Realisable Value = cost of sales less
expected cost to sell
35

Thank you for your attention

End of Chapter

36