Accounting in Merchandising Companies
5.6.4 T-accounts of transactions for illustration #2 of accounting for inventory
It is time to transfer the amounts to T-accounts.
Illustration 5-11: T-accounts of transaction for illustration #2
Assets |
= |
Liabilities |
+ |
Equity |
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Cash |
|
Accounts Payable |
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Contributed Capital |
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| Beg. 9,600 |
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|
Beg. 0 |
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Beg.12,000 |
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| (8) 3,430 |
(5) 400 (3b) 4,606 |
(2) 300 (3a) 94 (3b) 4,606 |
(1) 5,000 |
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Bal. 12,000 |
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| Bal. 8,024 |
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Bal. 0 |
Retained Earnings |
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| Merchandise Inventory |
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Beg. 2,800 |
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| Beg. 5,200 |
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(cl.) 1,280 |
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| (1) 5,000 (6b) 250 |
(2) 300 (3a) 94 (4b) 2,000 |
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Bal. 4,080 |
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| Bal. 8,056 |
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Sales Revenue |
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Beg. 0 |
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(6a) 500 (7) 70 (cl.) 3,430 |
(4a) 4,000 |
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| Accounts Receivable |
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| Beg. 0 |
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| (4a) 4,000 |
(6a) 500 (7) 70 (8) 3,430 |
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Bal. 0 |
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| Bal. 0 |
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Cost of Goods Sold |
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Beg. 0 |
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(4b) 2,000
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(6b) 250 (cl.) 1,750 |
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Bal. 0 |
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| Transportation-out |
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| Beg. 0 |
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| (5) 400 |
(cl.) 400 |
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| Bal. 0 |
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Totals |
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|
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Assets 16,080 |
= |
Liabilities 0 |
+ |
Equity 16,080 |
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5.6.5 Financial statements for illustration #2 of accounting for inventory
Finally, financial statements prepared for 20X6 and 20X7 are shown below.
Illustration 5-12: Financial statements for Dav's books for 20X6 and 20X7
Dav's
Books |
||
For the Period Ended 20X6 |
For the Period Ended 20X7 |
|
| Net Sales | $5,500 |
$3,430 |
| Cost of Goods Sold | (2,000) |
(1,750) |
| Gross Margin | $3,500 |
$1,680 |
| Less: Operating Expense Transportation-out Selling Expense |
|
|
| Operating Income | $2,800 |
$1,280 |
| Non-Operating Items | 0 |
0 |
| Net Income | $2,800 |
$1,280 |
Dav's
Books |
||
Period Ended 20X6 |
Period Ended 20X7 |
|
| Assets Cash Accounts Receivable Merchandise Inventory |
|
|
| Total Assets | $14,800 |
$16,080 |
| Liabilities Accounts Payable |
$ 0 |
$ 0 |
| Total Liabilities | $ 0 |
$ 0 |
| Equity Contributed Capital Retained Earnings |
|
|
| Total Equity |
$14,800 |
$16,008 |
| Total Liabilities and Equity | $14,800 |
$16,080 |
Page 6 of 8
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