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Ch 7: Merchandising Operations and Inventory in Accounting: Help and Review

About This Chapter

The Merchandising Operations and Inventory in Accounting chapter of this College Financial Accounting Help and Review course is the simplest way to master merchandising operations and inventory in accounting. This chapter uses simple and fun videos that are about five minutes long, plus lesson quizzes and a chapter exam to ensure students learn the essentials of merchandising operations and inventory in accounting.

Who's it for?

Anyone who needs help learning or mastering college accounting material will benefit from taking this course. You will be able to grasp the subject matter faster, retain critical knowledge longer and earn better grades. You're in the right place if you:

  • Have fallen behind in understanding merchandising operations or working with inventory in accounting.
  • Need an efficient way to learn about merchandising operations and inventory in accounting.
  • Learn best with engaging auditory and visual tools.
  • Struggle with learning disabilities or learning differences, including autism and ADHD.
  • Experience difficulty understanding your teachers.
  • Missed class time and need to catch up.
  • Can't access extra accounting learning resources at school.

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.
  • Retain What You Learn: Engaging animations and real-life examples make topics easy to grasp.
  • Be Ready on Test Day: Use the Merchandising Operations and Inventory in Accounting chapter exam to be prepared.
  • Get Extra Support: Ask our subject-matter experts any relevant question. They're here to help!
  • Study With Flexibility: Watch videos on any web-ready device.

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?

35 Lessons in Chapter 7: Merchandising Operations and Inventory in Accounting: Help and Review
Merchandising Company: Definition, Activities & Income Components

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.

Items that Make Up Merchandise Inventory

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.

Inventory Cost: Definition, Methods & Types

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.

Accounting for Inventory Purchases

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.

Perpetual and Periodic Inventory Systems

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.

Recording Purchases Using the Perpetual System

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.

Accounting for Inventory Sales

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.

Recording Sales Using the Perpetual System

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.

Reconciling the Bank Account After Purchases or Sales

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.

Inventory Counting: Process & Methods

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.

Inventory Valuation Methods: Specific Identification, FIFO, LIFO & Weighted Average

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.

The Importance of Evaluating Investment Management

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.

The Effects of Financial Statements on Costing Methods

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.

The Effects of Inventory Errors

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.

The Three Purposes of Cost Allocation

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.

Cost Allocation of Service Departments

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.

Implementing the Theory of Constraints (TOC)

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.

ABC Cost & Inventory Analysis: Examples

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.

Standard Cost Accounting System: Benefits & Limitations

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.

Standard Cost vs. Job Order Cost Accounting Systems

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.

Activity Cost Pools: Definition & Examples

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.

Process Costing vs. Job Order Costing

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.

Activity Ratios: Definition, Formula & Analysis

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.

Giffen Goods: Definition, Examples & Demand Curve

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.

Veblen Goods: Examples & Demand Curve

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.

Book Value: Definition, Formula & Examples

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.

Day Sales of Inventory (DSI): Formula & Examples

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.

Days Sales Outstanding (DSO): Definition & Formula

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.

Avoidable Costs in Accounting: Definition & Examples

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.

Difference Between Avoidable Costs & Unavoidable Costs

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.

Purchase Return & Allowances: Definition & Examples

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.

Purchase Return & Allowances Journal Entries

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.

Sales Returns & Allowances Journal Entries

33. Sales Returns & Allowances Journal Entries

This lesson will introduce you to the sales returns and allowances account. It allows returns and allowances to be tracked and reveal trends. Easy to follow examples will illustrate the journal entries.

Trade Credit: Advantages & Disadvantages

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.

What is Trade Credit in Business? - Definition & Types

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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