Topic 5 accting for retail bus ops PDF

TOPIC ACCOUNTING FOR RETAIL OPERATIONS Topic Part Learning Objectives On completion of this topic, you should be able to: Identify the differences between a service business and a merchandising business Understand the basic process and main features of the goods and services tax (GST) COMPARE INCOME STATEMENTS FOR A SERVICE BUSINESS WITH A RETAIL BUSINESS Kelly Cook eTravel Pty Ltd Statement of Profit or Loss for period May - June 2017 Revenue Service Revenue Expenses Advertising Expense Depreciation Expense Electricty Expense Printing & Stationery Expense Rent Expense Salaries & Wages Expense Total Expenses NET PROFIT 12,900 500 333 400 600 2,200 2,700 6,733 $ 6,167 Cindy’s Fashion Bags Statement of Financial Performance for period May - June 2017 Revenue Gross Sales Revenue 28,000 Less Cost of sales (COS) 14,000 GROSS PROFIT 14,000 Operating Expenses Advertising Expense 2,800 Depreciation Expense 800 Electricty Expense 400 Rent expense 3000 Salaries Expense 790 Total Expenses 7,790 NET PROFIT $ 6,210 | GST IN PRACTICE | RETAILING AND THE GST IN AUSTRALIA TAX INVOICE The seller (supplier) The purchaser (customer) The invoice date The credit terms of the transaction are 2/7, n/30 The details of the goods sold The total invoice amount GST inclusive – Total includes GST (which is 1/11th of total) GST exclusive – Total before GST (10% added on) To calculate GST excl from GST incl divide by 1.1 | INVENTORY - RECORDING TRANSACTIONS RETAILER • Purchases INVENTORY from suppliers with CASH or CREDIT • May get a DISCOUNT for early payment • May RETURN goods to supplier CUSTOMER • Retailers sell INVENTORY to retail customers for cash or credit • They may give a DISCOUNT for early payment • Customers may RETURN goods AASB 102 Inventories • • • Inventory means goods or property purchased and held for sale in the operating cycle of a business Other assets may be sold from time to time but not constitute inventory Also know as stock or stock in trade | ACCOUNTING FOR INVENTORY Two distinctly different inventory systems PERPETUAL INVENTORY SYSTEM • Maintains a continuous inventory record of all goods bought and sold • COST OF SALES (COS) is ‘perpetually’ updated as inventory is sold • As a result, the balance in the inventory account is the ENDING inventory amount PERIODIC INVENTORY SYSTEM • A physical stock take (an actual count) of inventory is required at end of period to update inventory and calculate COST OF SALES (COS) | TOPIC ACCOUNTING FOR RETAIL OPERATIONS Topic Part Learning Objectives On completion of this topic, you should be able to: Record purchases transactions under a perpetual inventory system incorporating GST Record sales transactions under a perpetual inventory system incorporating GST Kelly Cook eTravel Pty Ltd DISCOUNTS RECEIVED reduce the cost of sales for the business Retail Transactions for the month of July 2017 Transaction Date 03-July-2017 Kelly Cook eTravel P/L purchases inventory from a supplier, Fony Inc, for $700 (plus 10% GST) on credit terms of 3/15, NET 30 DAYS 03-July-2017 Kelly Cook eTravel P/L pays freight-in cost of $77 (inc GST) in cash 15-July-2017 Kelly Cook eTravel P/L pays the Fony Inc account (within 15 day discount period) Date Particulars 3/7/17 3/7/17 Inventory Inventory GST Paid (Receivable) GSTAccounts Paid (Receiveable) Payable Accounts Payable on credit) (Purchase inventory (Purchase inventory on credit) Inventory 3/7/17 3/7/17 15/7/17 15/7/17 GENERAL JOURNAL Post Ref 140 140 145 145 200 DEBIT 700.00 70.00 70.00 Open Bal GENERAL LEDGER T-ACCOUNTS CREDIT DEBIT Cash @ Bank #100 21,900 77 3/7/17 746.90 15/7/17 15/7/17 CREDIT Accts Pay #200 200 Open Bal 770 3/7/17 770 Salaries payable #220 770.00 300 Open Bal 770.00 GST Collected #235 70.00 Inventory GST Paid (Receivable) Cash(Receiveable) at Bank GST Paid (Freight Cash in) at Bank (Freight-in) 140 145 100 145 100 70.00 7.00 7.00 Accounts Payable CashPayable at Bank Accounts Discounts Cash at BankReceived GST Collected (Payable) Discounts Received 200 770.00 200 100 418 310 235 418 235 770.00 (Payment of acct with 3% discount) GST Collected (Payable) CREDIT 700.00 200 140 DEBIT Open Bal Accts Rec #110 2,400 2.10 15/7/17 77.00 77.00 Sales Revenue #410 Inventory #140 746.90 21.00 746.90 2.10 21.00 3/7/17 700 3/7/17 70 Sales Ret & Allow #412 2.10 (Payment of account with 3% discount) 3/7/17 3/7/17 GST Paid #145 70 Sales Discounts #415 Discounts Rec'vd #418 21 15/7/17 AASB102: FREIGHT IN charges should be included in cost of inventory (impacts Gross Profit) for the business Cost of Sales #520 - When the business makes a sale and delivers the goods to the customer FREIGHT OUT is an operating expense that only impacts Net Profit Salaries & Wages # 590 | 10 GENERAL JOURNAL Date Particulars Post Ref 100 19/7/17 at Bank 100 Cash at Bank 19/7/17 Cash Sales 410 SalesRevenue Revenue 410 GSTCollected Collected(Payable) (Payable) GST 235 235 (Cash sale) (Cash Sale) DEBIT 330.00 330.00 CREDIT 300.00 300.00 30.00 30.00 19/7/17 Cost 19/7/17 of Sales Cost of Sales Inventory Inventory (Cost of inventory (Cost of inventorysold) sold) 520 520 140 140 190.00 190.00 Accounts Receivable 20/7/17 Accounts 20/7/17 Receivable Sales Revenue Sales Revenue Collected(Payable) (Payable) GST Collected (Credit Sale) (Credit Sale) 110 110 410 410 235 235 792.00 792.00 20/7/17 Cost Cost Sales 20/7/17 of of Sales Inventory Inventory (Cost(Cost of inventory sold) of inventory sold) 520 520 140 140 470.00 470.00 Salaries & Wages Payable 21/7/17 Salaries 21/7/17 & Wages Payable Salaries & Wages Expense Salaries & Wages Expense CashatatBank Bank Cash (Salaries Expense) (salaries expense) 220 220 590 300.00 300.00 900.00 900.00 19/7/17 330 26/7/17 711.48 21/7/17 20/7/17 412 412 145 145 110 110 22/7/17 22/7/17 Inventory Inventory CostofofSales Sales Cost (Placedgoods good back backinininventory) inventory) (placed 140 140 520 520 26/7/17 Cash Cashatat Bank 26/7/17 Bank Sales Discounts (Allowed) Sales Discounts (Allowed) GST(Receiveable) Paid (Receivable) GST Paid Accounts Receivable Accounts Receivable 100 100 415 415 145 145 792 720.00 720.00 66 726 470.00 470.00 22/7/17 40 150 190 470 66.00 66.00 15-July-2017 110 (Cash collection within discount period)period) (Cash collection within discount 700.70 711.48 13.20 13.00 1.30 1.32 715.00 726.00 60 26/7/17 13.20 19/7/17 20/7/17 190 470 620 21/7/17 900 Kelly Cook eTravel P/L pays the Fony Inc account (within 15 day discount period) Retail Transactions for the month of July 2017 40.00 40.00 22/7/17 1.32 84.32 Kelly Cook eTravel Pty Ltd 40.00 40.00 300 19/7/17 720 20/7/17 1020 19/7/17 20/7/17 1200.00 1,200.00 60.00 60.00 6.00 6.00 30 19/7/17 72 20/7/17 104.10 22/7/17 26/7/17 2,400 72.00 72.00 22/7/17 26/7/17 22/7/17 Sales 22/7/17 & Allows SalesReturns Returns & Allowances GST Paid GST Paid(Receivable) (Receiveable) Accounts AccountsReceivable Receivable (Receipt (Receiptofofreturned returned goods) goods) 300 20,917.58 190.00 190.00 100 100 1200 21/7/17 Date Transaction 19-July-2017 Kelly Cook eTravel P/L makes a cash sale of $330 (inc GST) to ABC, cost of sales is $190 20-July-2017 Kelly Cook eTravel P/L makes a credit sale of $792 (inc GST) to RightLaw on credit terms 2/10 NET 30 DAYS, cost of these sales is $470 21-July-2017 Kelly Cook eTravel P/L pays cash expenses of 1,200 for Salaries & Wages 22-July-2017 RightLaw returns $66 (inc GST) of goods that cost $40 (ex GST) 26-July-2017 RightLaw settles their account within the 2% discount period SALES RETURNS & ALLOWANCES (Discount Allowed) are subtracted from sales revenue to calculate net revenue which impacts Gross Profit for the business 40 22/7/17 | 11 TOPIC ACCOUNTING FOR RETAIL OPERATIONS Topic Part Learning Objectives On completion of this topic, you should be able to: Prepare a fully classified statement of profit or loss Use ratios to analyse profitability for a retail business Remitting GST to the government ANALYSING FINANCIAL STATEMENTS FOR DECISION MAKING Kelly Cook eTravel Pty Ltd Statement of Financial Performance for month period December 2017 Revenue Gross Sales Revenue Less Sales Returns & Allowances Less Sales Discounts Allowed Net Sales Revenue Less Cost of sales (COS) GROSS PROFIT Operating Expenses Advertising Expense Depreciation Expense Electricty Expense Rent expense Salaries Expense Total operating Expenses NET PROFIT 48,500 -1190 -70 47,240 -14,230 33,010 6,100 1,000 420 6,600 7,200 21,320 $ 11,690 | 14 ANALYSING FINANCIAL STATEMENTS FOR DECISION MAKING GROSS PROFIT RATIO measures the proportion of profits generated by the sale of products or services, before operating expenses – that how effective the business is in buying/producing & selling OPERATING EXPENSES TO SALES RATIO measures the efficiency of a business's management in running the operations side of the business | 15 ANALYSING FINANCIAL STATEMENTS FOR DECISION MAKING Kelly Cook eTravel Pty Ltd Statement of Financial Performance for month period December 2017 Revenue Gross Sales Revenue Less Sales Returns & Allowances Less Sales Discounts Allowed Net Sales Revenue Less Cost of sales (COS) GROSS PROFIT Operating Expenses Advertising Expense Depreciation Expense Electricty Expense Rent expense Salaries Expense Total operating Expenses NET PROFIT RATIO FORMULA $ Gross Profit Ratio Gross Profit 33,010 Net Sales 47,240 Operating Expenses 21,320 Operating Expenses To Sales Ratio Net Sales 47,240 48,500 -1190 -70 47,240 -14,230 33,010 6,100 1,000 420 6,600 7,200 21,320 $ 11,690 Kelly Cook Flight Central 70% 68% 45% 32% | 16 REMITTING GST TO THE ATO 3/7/17 3/7/17 22/7/17 26/7/17 GST Paid #145 70 1.30 84.30 GST Collected #235 2.10 30 72 104 15/7/17 19/7/17 20/7/17 | 17 ... revenue which impacts Gross Profit for the business 40 22/7/17 | 11 TOPIC ACCOUNTING FOR RETAIL OPERATIONS Topic Part Learning Objectives On completion of this topic, you should be able to: Prepare... Paid #1 45 70 Sales Discounts #4 15 Discounts Rec'vd #418 21 15/ 7/17 AASB102: FREIGHT IN charges should be included in cost of inventory (impacts Gross Profit) for the business Cost of Sales #52 0 -... Paid Accounts Receivable Accounts Receivable 100 100 4 15 4 15 1 45 1 45 792 720.00 720.00 66 726 470.00 470.00 22/7/17 40 150 190 470 66.00 66.00 15- July-2017 110 (Cash collection within discount period)period)