Accounting for Merchandising Organizations IP

Running Head : LE FLEUR

Accounting for Merchandising Operations

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Accounting for Merchandising Operations

1 . To get Le Fleur 's Net Sales Revenue , the Gross Sales , the Sales amount not yet deducted with contra-Sales accounts , must be reduced by Sales Discounts and Sales Returns and Allowances . The former refers to the cash discounts given by Le Fleur to its customers who paid for their credits early . The latter refers to the amount of merchandise returned by customers to Le

Fleur for reasons like low quality , defects , and the like . In such a case , the Gross Revenue of E400 , 000 must be deducted by the Sales Discounts and Sales Returns given with E4 , 000 and E8 , 000 respectively . The net result would be E388 , 000 , which is the Net Sales Revenue of Le Fleur . This will be the amount which should and which would cover for the cost of sales of the firm

Net Sales Revenue

Gross Sales Revenue E 400 , 000

Less : Sales Discounts 4 , 000

Sales Returns 8 , 000 12 , 000

Net Sales Revenue 388 , 000

2 . The Cost of Sales is the largest single expense of the business . It is the cost of inventory that Le Fleur has sold to its customers . This includes the inventories , the purchases of goods less the amount of discounts and returns , and the shipping cost . The amount of inventory at the beginning of the period is added to the Net Purchases to get the amount of Goods Available for Sale . The Net Purchases consists of the gross Purchases less Purchases Returns and Discounts , both contra-accounts to purchases , plus the transportation cost . The concept of these two contra-accounts is similar to that of Sales Discounts and Returns , only on the point of view of Le Fleur as the supplies or inventory buyer . The Goods Available for Sale will then be reduced by the inventory at the end of the period , meaning the goods still left unsold . It will be deducted from such since the computation will be for the amount of goods already sold . As a result , the Beginning Inventory of E20 , 000 is added to the Net Purchases [ (E 250 , 000 - 7 , 000 - 3 000 8 , 000] of E248 , 000 , which resulted to the Goods Available for Sale , reduced by the Ending Inventory of E30 , 000 , obtaining the Cost of Goods Sold at E238 , 000

Cost of Goods Sold

Beginning Inventory E 20 , 000

Purchases 250 , 000

Less : Purchase Returns 7 , 000

Purchase Discounts 3 , 000 10 , 000

240 , 000

Freight In 8 , 000

Net Purchases 248 , 000

Goods Available for Sale 268 , 000

Less : Ending Inventory 30 , 000

Cost of Goods Sold 238 , 000

3 . The Gross Profit , also known as the Gross Margin from Sales , is the amount which will cover the operating and other expenses of Le Fleur Simply , Gross Profit is the difference between Net Sales Revenue and Cost of Goods Sold , thus (E388 , 000 - E238 , 000 ) the...