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SERVICE VS MERCHANDISE BUSINESS

Service Business: Like TechKnow Consulting, Sell a service for a fee (intangible) Merchandising Business: a business that purchases goods and sell goods (tangible-finished goods). Ex: Best Buy

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SERVICE VS MERCHANDISE BUSINESS

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  1. Service Business: Like TechKnow Consulting, Sell a service for a fee (intangible) • Merchandising Business: • a business that purchases goods and sell goods (tangible-finished goods). Ex: Best Buy • Merchandise: goods that a business purchases to sell - Best buy purchases Dell computers. • Items you buy to operate your business = supplies • Items you buy to sell to a customer = merchandise SERVICE VS MERCHANDISE BUSINESS

  2. Two Types of Merchandising businesses: • Retail merchandising business: • sells to those who use or consume the goods (i.e. to you the consumer) Example: Best Buy to you…. 2. Wholesale merchandising business: • a business that buys and resells merchandise to retail merchandising businesses MERCHANDISING BUSINESS

  3. The PowerPoints for Acct. 2 are for a Retail Merchandising Business Hobby Shack, INC • Sells crafts and hobby items: silk flowers, ceramics, paints and jewelry • A Corporation • Corporation: an organization with many owners • Share of Stock: each unit of ownership • Capital Stock: total shares of ownership • Stockholder: an owner of one or more shares of a corporation • What are some advantages and disadvantages of this type of business? HOBBY SHACK, INC

  4. Recording journal entries: • Journal = used when company has only a few daily transactions • Special Journal = used by companies with many daily transactions – use more than one journal type • Don’t confuse with special columns - both have these • Special Journal is a journal used to record only one kind of transaction • Five that we will use at Hoppy Shack: • Purchases Journal – purchase merchandise (sell) on account • Cash Payments Journal – all cash payments • Sales Journal – all sales of merchandise on account • Cash Receipts Journal – all incoming cash receipts • General Journal – All other transactions SPECIAL JOURNAL

  5. LESSON 9-1 Journalizing Purchases Using a Purchases Journal What types of transactions are entered into a Purchase Journal? Purchase Merchandise on Account

  6. Cost of merchandise: Markup: Vendor: TERMS the price a business pays for goods it purchases to sell the amount added to the cost of merchandise to establish the selling price a business from which merchandise, supplies or other assets are purchased 1. Cost $300, Sold for $450. What is the Markup? 2. Sell for $700, Markup is $100. What is the cost? 3. Cost was $200, Markup was $150, what is the selling price? $150 $600 $350

  7. Revenue = Cost of Merchandise + Markup The Capital is increased by the Markup value only WHY IS MARKUP IMPORTANT? How Much does Capital Increase by? $150 1. Cost $300, Sold for $450? 2. Sold for $700, Markup is $100? 3. Cost was $200, Markup was $150? $100 $150

  8. Terms Continued Purchase on Account - a transaction in which the merchandise purchased is to be paid for later Purchases Journal - a special journal used to record only purchases of merchandise on account Purchase on Account affects two accounts: - Purchases and Accounts Payable

  9. PURCHASING MERCHANDISE 5110 Purchases – - Account to record cost of merchandise (you purchased) • Temporary account (will be closed at end of Fiscal year) • Reduces capital when merchandise purchased • Has a Normal Balance (always increases) of Debit • Increases as a Debit, Decreases as a Credit NB +

  10. PURCHASES ON ACCOUNT 2110 Accounts Payable – • Purchases on account increases the value of what you owe • Normal Balance = Credit (not a new concept) • Decreases on Debit, Increases on Credit

  11. PURCHASE INVOICE 1. Stamp the date received andpurchase invoice number. 3. Initials of the person whochecked the invoice. 2. Place a check mark by each amount. 4. Review the vendor’s terms.

  12. PURCHASES JOURNAL page 237 Special amount column: a journal amount column headed with an account title

  13. PURCHASES JOURNAL page 237 November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83. Special amount column: a journal amount column headed with an account title

  14. PURCHASING MERCHANDISE ON ACCOUNT November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83. What two Accounts are impacted and how?

  15. TOTALING AND RULING A PURCHASES JOURNAL 1. Ruled at end of Month or end of page 4. Add the amount column. 5. Write the total. 2. Rule a single line across the amount column 6. Rule double lines across the amount column. 3. Write the date and Total

  16. merchandise merchandising business retail merchandising business wholesale merchandising business corporation share of stock capital stock stockholder special journal cost of merchandise markup vendor purchase on account purchases journal special amount column purchase invoice terms of sale TERMS REVIEW

  17. Work Together 9-1 Work Together

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