ACCY 202 J. Shapland Lecture 2 Outline of Last LectureI. Accounting 202 by Julie ShaplandI. Required course material1. Connect2. I>clicker3. Notes PackageII. Course InformationIII. Weekly ScheduleIV. Compass SiteV. Major changes this semesterVI. Look through section III for class tipsVII. Introduction to Week 1 materials: Purchase of Inventory1. Phase 12. Accounting Information System (AIS)VIII. Purchase and Disbursement Cycle1. Step 1: Request Goods & Services2. Step 2: Authorize Purchase3. Step 3: Purchase goods/services4. Step 4: Receive goods & services5. Step 5: Make Paymenti. First, Vendor invoice is received, verified and the purchase is recordedii. Second, payment is authorized; a check is prepared and mailed to the vendorOutline of Current Lecture I. Inventory1. Definitioni. Merchandise Inventoryii. Manufacturing InventoryII. Balance Sheet vs. Income Statement1. Balance SheetThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.2. Income Statement3. How things transferIII. Recording Merchandise Purchases – 4 events to considerIV. Purchase Contract1. Trade Discount2. Purchase DiscountCurrent LectureI. Inventory1. Goods held for sale in the normal course of business (merchandiser) or goods which are used to produce goods or services for sale (manufacturer)i. Merchandise Inventory: Ready to be sold without further processing. Retail industry such as H&M, Forever 21, Sports Authority etc.ii. Manufacturing Inventory: Identified by its stage of production. An example is the haute couture industry in Europe (Italy, France) from the textile stage (such as polyester) to the finished work. Stages are raw materials. Work in progress and finished goods.II. Balance Sheet vs. Income Statement1. Balance Sheet Assets that are waiting to be sold, sitting or have not been used yet, including cash2. Income StatementExpenses that have already been incurred, including gross profit and net income.3. How things transfer- Inventory goods on balance sheet  Cost of merchandise Sold on Income Statement. Inventory is a current asset while waiting to be sold- Flow chart on page 14 of notes package shows how to record expensesIII. Recording Merchandise Purchases – 4 events to consider- Record the purchase of inventory at negotiated price when the company legally owns the asset- Record any additional costs of acquisition (most frequently seen as shipping costs)- Record all returned inventory amounts to the seller (if any) on the specific date- Record the cash payment net of the purchase discount (if any) on the payment dateIV. Purchase Contract1. Trade Discount- The negotiated price stated in step 1 of the recording merchandise purchasesprocess is the result of the trade discount. They are not separate2. Purchase Discount- This gives the buyer an opportunity to obtain another discount if they pay for the merchandise in a specific period of time.- Example: 1/10, n/30 this means that if the buyer pays for inventory within 10 days of legally owning it, then they can obtain a 1% discount. If they pay after 10 days they will have to pay the full amount within 30