MULTI-STEP INCOME STATEMENT MERCHANDISE ACCOUNTING Calculation Steps for Gross Profit NET SALES - SALES - RETURNS - ALLOWANCES - SALES DISCOUNTS NET PURCHASES - BEGINNING INVENTORY + PURCHASES RETURNS - ALLOWANCES PURCHASE DISCOUNTS COST OF MERCHANDISE PURCHASED = NET PURCHASES + FREIGHT MERCHANDISE AVAILABLE FOR SALE BEGINNING INVENTORY + COST OF MERCHANDISE PURCHASED COST OF MERCHANDISE SOLD = COST OF MERCHANDISE AVAILABLE FOR SALE - ENDING INVENTORY GROSS PROFIT = NET SALES-COST OF MERCHANDISE SOLD Calculation of Operation Expenses TOTAL OPERATING EXPENSESS Selling expenses + Administrative expenses Calculation of Income from Operatons INCOME FROM OPERATION = GROSS PROFIT - TOTAL OPERATING EXPENSES Calculation of Net Income before Tax NET INCOME BEFORE TAXE Income from Operations + Miscellaneous Revenue - Miscellaneous Expenses OTHER IMPORTANT INFORMATON TO KNOW 1) ERTUAL SYSTEM Intel Cost of Merchandises COMS) ed income with each transaction PERIODIC SYSTEM Intres and cont of Merchandise Sol CMS mounts are updated at end of perioduly end of month c) FREIGHT OURGESFO Freeon Board on our FOB DESTINATION SELLER PAYS FREIGHT FOR SHIPPING POINT: BUYER PAYS FREIGHT CREDIT CARD TRANSACTIONS Mastercard and Visa are treated water because they are really read through during how that contacts the bank that American Express may be red ca cearing home is used by the retailerres Accounts Receivable *sent direct to AMX 14) SALES AND PURCHASE DISCOUNTS 2/10,02% pad within tend din days 30.net dentity MULTI-STEP INCOME STATEMENT Column 1 2 3 SALES REVENUE Gross Sales Less: Returns & Allowances Sales Discounts NET SALES $720,185 -6.140 5.790 11.930 $708,255 $59,700 COST OF MERCHANDISE SOLD Merchandise Beginning Inventory Purchases Less: Returns & Allowances Purchase Discounts Net Purchases Add: Freight costs Cost of Merchandise Purchased (COMP) MERCHANDISE AVAILABLE FOR SALE (B! + COMP) Less: Merchandise Ending Inventory COST OF MERCHANDISE SOLD GROSS PROFIT: 521,950 9.100 -2.5255 -11.625 510,355 17.400 5276755 587,455 -62.150 -525305 182,950 LESS: OPERATING EXPENSES: Selling Expenses: Sales salaries Advertising Depreciation expense equipment Delivery expense Miscellaneous expenses 53.430 10,860 3.100 2.800 630-70,820 Administrative Expenses: Office Salaries Rent Depreciation expense-equipment Insurance expense Office supplies expenses Miscellaneous administrative expenses TOTAL OPERATING EXPENSES INCOME AFTER OPERATIONS: 21,020 8.100 2.490 1.910 610 76034.890 -105 710 77,240 OTHER INCOME AND EXPENSES: Rent revenue Interest rexpenses NET INCOME BEFORE TAX: 6001 -2.040 -1840 75.400