Discussion questions - Essay Example

Discussion Discussion What types of items are not kept in a special journal? a. Sales returns and cash sales are not kept in a special journal. Moreover, goods purchased or payables settled using cash are also not included in this journal. This suggests that this journal only includes transactions made on credit (Weygandt, Kimmel, & Kieso, 2010).2) A merchandiser uses two new accounts, Merchandise Inventory and Cost of Merchandise Sold. Why is this? If a sale were made from a merchandiser, what would the entry be if the sale was for $10 and the actual cost to the merchandiser had been $7?a. A merchandiser uses two accounts merchandise inventory and cost of merchandise cost because of the difference in their nature.

Merchandise inventory is the asset of the business and records movement in the cost of inventory and reports opening and ending inventory value held by the business. Entry into this journal is a debit entry whereas exist from this is a credit entry. This records the cost of purchase include suppliers price plus freight costs and insurance. Whereas, cost of merchandise sold is the cost of the business charged against revenues. Cost of merchandise is calculated as beginning inventory plus purchases less closing inventory.

Journal entries to record the transaction would be as follows:Dr CrSales 10Cost of Goods 7 Inventory 7Cash 10 3) How would you calculate gross profit in a merchandising type business class?a. Gross profit is calculated by deducting the cost of sales (merchandise) from the revenues generated by the business. Revenues are typically cost of sales plus the profit margin decided by the business.4) Describe the role of accounting in business.a. The role of accounting is not limited to recording of transactions but it is an integral part of planning and strategy development carried out by businesses.

Assembling data generated by different business functions in order to summarize and report information pertaining to the business condition is primary task of the accounting function. Accounting is therefore considered as a series of processes which generate different information for various use including financial information, managerial information, cost information, and information for tax purposes (Warren, Reeve, & Duchac, 2012). Reference ListWarren, C. S., Reeve, J. M., & Duchac, J. E. (2012).

Financial accounting. Mason, OH: South-Western Cengage Learning.Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2010). Financial Accounting, Study Guide. Hoboken, NJ: John Wiley & Sons. Retrieved from McGraw Hill: http://highered.mcgraw-hill.com/sites/dl/free/0073526681/355565/wiL03970_appE.pdf