About This Chapter
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- Have fallen behind in understanding merchandising operations or working with inventory in accounting.
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How it works:
- Start at the beginning, or identify the topics that you need help with.
- Watch and learn from fun videos, reviewing as needed.
- Refer to the video transcripts to reinforce your learning.
- Test your understanding of each lesson with short quizzes.
- Submit questions to one of our instructors for personalized support if you need extra help.
- Verify you're ready by completing the Merchandising Operations and Inventory in Accounting chapter exam.
Why it works:
- Study Efficiently: Skip what you know, review what you don't.
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Students will review:
In this chapter, you'll learn the answers to questions including:
- What items are found in a merchandising inventory?
- How much does it cost a company to maintain its inventory?
- How are inventory costs calculated and recorded?
- How do periodic and perpetual inventory systems work?
- What methods are used to value inventories?
1. Merchandising Company: Definition, Activities & Income Components
Do you know what a merchandising company is? If you said it's a store, you are right. It is a store, but it is also so much more. In this lesson, we are going to discuss some of the major components of a merchandising company.
2. Items that Make Up Merchandise Inventory
In order to operate, merchandising companies must carry inventory. What exactly makes up merchandise inventory? In this lesson, you will not only learn the answer to that question, but also several other important factors that relate to merchandise inventory.
3. Inventory Cost: Definition, Methods & Types
Have you ever thought about how much it costs a business to keep inventory in stock? It's not just the price the business pays for the items that it keeps in stock. It is so much more. In this lesson, we will discuss exactly what constitutes actual inventory cost.
4. Accounting for Inventory Purchases
A merchandising company must purchase inventory, and it has to be accounted for in the accounting records. In this lesson, you will learn how to calculate inventory purchase amounts as well as how to record them in the accounting journals.
5. Perpetual and Periodic Inventory Systems
Inventory management is an important part of business success. In this lesson, we will discuss the two types of inventory systems used in accounting today.
6. Recording Purchases Using the Perpetual System
Every transaction that occurs in a business, whether it is a purchase or a sale, must be accounted for. In this lesson, you will learn how to record purchases using the perpetual inventory system.
7. Accounting for Inventory Sales
In order to operate, a business must make sales. In this lesson, we are going to discuss sales of inventory. You will learn the types of sales made, the items that affect sales profit, and the way to record sales in the accounting records.
8. Recording Sales Using the Perpetual System
Each transaction that occurs in a business has an impact on at least two or more accounts. Because of that, recording transactions is essential. In this lesson, you will learn about recording sales transactions using the perpetual inventory system.
9. Reconciling the Bank Account After Purchases or Sales
Even if your accounting skills are top notch, you still should make sure that the books have been reconciled with the bank account in question. This lesson explains why.
10. Inventory Counting: Process & Methods
It is important for any business to know how much and what types of items that they have available to sell. In this lesson, you will learn what inventory is, how to count it, and why it is important.
11. Inventory Valuation Methods: Specific Identification, FIFO, LIFO & Weighted Average
This lesson introduces you to the cost flow assumption methods of specific identification: FIFO, LIFO, and weighted average. You will also learn how to compute inventory in a perpetual system using the methods of FIFO, LIFO, and weighted average.
12. The Importance of Evaluating Investment Management
Whether you're an individual or the financial manager of a company, the ability to evaluate your investment managers is a valuable skill in order to make sure that you are investing as much as possible.
13. The Effects of Financial Statements on Costing Methods
The way you calculate the cost of your inventory can change the profit you show on your financial statement. Learn how one method can show higher profits, while the other method can give you tax benefits.
14. The Effects of Inventory Errors
For companies, a miscount of inventory can be a serious issue. In this lesson we'll look at the effects of inventory errors on companies, both with respect to profits and how the error should be recorded.
15. The Three Purposes of Cost Allocation
This lesson focuses on the three main purposes for allocating costs. These are to: 1) make decisions, 2) reduce waste, and 3) determine pricing. At the conclusion of this lesson, you should be familiar with these and be able to give examples for each.
16. Cost Allocation of Service Departments
Making sure that you have properly allocated all relevant costs is an important part of business. In this lesson, we look at three major reasons why doing so is in every company's best interests.
17. Implementing the Theory of Constraints (TOC)
This lesson discusses the implementation of the Theory of Constraints (TOC) methodology, the four basic types of constraints, and how the theory directly correlates to activity-based costing.
18. ABC Cost & Inventory Analysis: Examples
In this lesson, we will explore ABC cost and inventory analysis. We will define it, look at some examples, and explain why a company may use this type of system. The lesson will conclude with a summary and quiz.
19. Standard Cost Accounting System: Benefits & Limitations
Standard cost accounting is one of the most common forms of accounting systems. In this lesson, we will learn how it is used, as well as its benefits and limitations. We will also learn about the variances that occur using this accounting method.
20. Standard Cost vs. Job Order Cost Accounting Systems
A company's inventory can be valued using different methods. The method you choose depends upon the type of goods that the business is producing. Two such costing methods are job order costing and standard costing.
21. Activity Cost Pools: Definition & Examples
Activity cost pools are used in activity-based costing systems to allocate manufacturing overhead to specific products. Learn what activity cost pools are and how to use them in this lesson.
22. Process Costing vs. Job Order Costing
This lesson introduces two traditional costing methods: job order costing and process costing. You'll see examples of both and learn how companies can utilize either or both processes in their business.
23. Activity Ratios: Definition, Formula & Analysis
Businesses need to know how soon they can convert their assets into cash. They use activity ratios to figure it out. In this lesson, you'll learn the definition of activity ratio, as well as about some common types.
24. Giffen Goods: Definition, Examples & Demand Curve
Believe it or not, there have been a couple of products in the world that have experienced increased demand with increased price. Learn how this happens in this lesson.
25. Veblen Goods: Examples & Demand Curve
Read this lesson to learn how some super expensive products actually sell more at its higher price versus at a lower price. Learn why this is so and why people choose to purchase these high price items.
26. Book Value: Definition, Formula & Examples
An item's book value is the most accurate depiction of what it is currently worth. Most items lose value over time and are not worth their original value after they have been used. Let's take a look at book value and how it is calculated.
27. Day Sales of Inventory (DSI): Formula & Examples
Companies purchase inventory to sell at a profit. In this lesson we will discuss the days' sales of inventory formula and how it allows a business to monitor the length of time selling the items in its inventory takes.
28. Days Sales Outstanding (DSO): Definition & Formula
Many businesses sell products to its customers on credit, giving them more time to pay for the product or service. Days Sales Outstanding (DSO) allows businesses to monitor how long it takes the business to collect money from its customers.
29. Avoidable Costs in Accounting: Definition & Examples
What are avoidable costs? When running a business they can be critical. This lesson provides the definition and examples of this concept which is important for all companies, but especially important for companies facing financial difficulties.
30. Difference Between Avoidable Costs & Unavoidable Costs
In this lesson, we will compare avoidable costs and unavoidable costs. We'll define each term and then give examples of each to highlight the differences.
31. Purchase Return & Allowances: Definition & Examples
Merchandise is received in unsatisfactory condition for a variety of reasons. The buyer may return the merchandise for a refund or decide to keep the merchandise and ask the seller for a reduced price on the unsatisfactory items.
32. Purchase Return & Allowances Journal Entries
Merchandise may need to be returned for a variety of reasons, including defects, damages or wrong sizes. Allowances reduce the sale price when defective goods are retained by the buyer. Journal entries for both are illustrated with examples.
33. Sales Returns & Allowances Journal Entries
This lesson introduces you to the sales returns and allowances account. Journal entries for this account allows returns and allowances to be tracked and reveal trends. Easy-to-follow examples illustrate these journal entries.
34. Trade Credit: Advantages & Disadvantages
When done properly, trade credit can generate more sales for both retail merchants and the suppliers they buy from. There are also other advantages and disadvantages for both parties from trade credit transactions.
35. What is Trade Credit in Business? - Definition & Types
Trade credit is similar to consumer credit but it is between businesses. Trade credit allows a retailer to take possession of inventory today and pay for it at a later date. The process will be illustrated with simple examples and a formula.
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Other chapters within the Financial Accounting: Help and Review course
- Introduction to Accounting: Help and Review
- Financial Statements in Accounting: Help and Review
- Mechanics of the Accounting Cycle: Help and Review
- Project Evaluation & Analysis
- Preparing Financial Statements: Help and Review
- Internal Controls in Accounting: Help and Review
- Current and Long-Term Liabilities in Accounting: Help and Review
- Adjusting Accounts & Preparing Financial Statements: Help and Review
- Taxation of Business Entities
- Accounting Changes & Errors
- Classifying Costs in Accounting
- Cost Accounting Methods
- Cash Flow Statements & Disclosures
- Asset & Inventory Management
- Small Business Financing
- Small Business Accounting
- Financial Reporting
- Banking, Insurance & Monetary Policy
- Types of Financial Risk
- Credit Risk
- Derivatives in Finance Overview
- Capital Markets in Risk Management
- Managing Financial Risk
- Financial Risk & Decision-Making