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VISUAL #4-2
COMPONENTS OF NET INCOME (FROM OPERATIONS)
Steps:
(a) Net Sales X
(b) –Cost of Goods Sold* – X
(c) Gross Profit on Sales X
(d) –Operating Expenses – X
(e) Net Income (Loss) from Operations X
(c) Net Purchases X
(d) + Transportation In + X
(e) Cost of Goods Purchased X
* Perpetual inventory systems have a cost of goods sold account that continuously
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VISUAL #4-3
ACCOUNTS USED IN BASIC MERCHANDISING TRANSACTIONS
WITH A PERPETUAL INVENTORY SYSTEM
ASSETS LIABILITIES
REVENUES
& CONTRA-REV.
Cash
Accounts
Payable Sales
Dr. Bal. Cr. Bal. Cr. Bal.
+ + +
Accounts
Receivable
Sales Returns &
Allowance
Dr. Bal. Dr. Bal.
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VISUAL #4-4
ACCOUNTS USED IN BASIC MERCHANDISING TRANSACTIONS
WITH A PERIODIC INVENTORY SYSTEM
ASSETS LIABILITIES
REVENUES
& CONTRA-REV.
COST & CONTRA-
COST
Cash
Accounts
Payable Sales Purchases
Dr. Bal. Cr. Bal. Cr. Bal. Dr. Bal.
+ + + +
Accounts
Receivable
Sales Returns &
Allowance
Purchase Returns
& Allowances
Dr. Bal. Dr. Bal. Cr. Bal.
+ + +
Merchandise
Inventory
Sales
Discount
Purchases
Discount
Dr. Bal. Dr. Bal. Cr. Bal.
+ + +
Transportation-In
EXPENSE Dr. Bal.
Delivery
Expense
+
Dr. Bal
+
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