Glencoe Accounting

Unit 4: The Accounting Cycle for a Merchandising Corporation

WebQuest Internet Project


Online shopping is a growing business with more than $100 million in annual sales. Consumers shop online for convenience and sometimes out of necessity. Because of their remote locations, people in Hawaii and Alaska make the most Internet purchases. In this project you will learn how to shop safely online.

The Task

As the owner of a website design business, you have been asked to make an oral presentation to members of the Better Business Bureau (BBB) on what it takes to run a successful retail shopping Web site. Your presentation should include information on credit card security, payment processing, and product presentation. BBB members will also be interested in how accounting records can be updated with online transaction data.

The Process

To successfully prepare your presentation you will need to complete the following items.

  • Use these Web resources to gain an understanding of e-commerce.

Report: Online Retail on Easy Street

How E-Commerce Works

How Creating an Online Business Works

Monster Merchant Account

Online, Credit Cards are the Only Way to Buy

Shopping Cart Software


  • Make a list of reasons why it is advantageous for a brick and mortar business to add an e-commerce site.
  • Describe the trend in online shopping, supported by data or statistics.
  • List reasons why some customers might be hesitant to shop online.
  • Outline the basic elements that should be included on an e-commerce web site.
  • Identify the ways in which customers can be assured of a secure shopping experience.
  • List online payment options.
  • Find examples of how you believe products should be effectively displayed online.
  • List the features that are often included in shopping cart technologies.

To improve your presentation, consider the following questions and suggestions:

  1. What is a merchant account?
  2. What discount rate (a rate the bank charges per bankcard transaction) is typically charged for Internet transactions?
  3. What is a PayPal account?
  4. What experiences may discourage a person from shopping online?

Here are some suggestions for finishing your report.

  • Create an online or a print brochure to advertise how your company can help a brick and mortar business become a profitable e-commerce site.
  • Prepare charts or graphs depicting the trend in online commerce.
  • Gather screen shots of web sites that are highly popular in online shopping. Discuss why you think these sites are successful.
  • To which special journal would bankcard sales be posted?
  • In a manual accounting system, which two accounts are affected when adjusting Merchandise Inventory after a physical inventory count?
  • Imagine that closes its expense and revenue accounts to the Income Summary account for the year. The balance of the Income Summary account is a credit of $49,376. Has experienced a net income or a net loss for the period?
  • Assume you have a credit account with If you make an online purchase of a sports watch for $25 plus 8% sales tax on credit, how would the business record your purchase?
Chapter Activities Chapter 14

Many credit card companies offer a personal password for their customers to use when shopping online. Some even provide a one-time credit card number, which can be used for only one purchase. This prevents hackers from accessing your card number and attempting to use it for other purchases.


  • When a customer uses a bankcard like VISA or Mastercard for a purchase, does the business treat this transaction as a receivable or as cash?
Chapter 16

After Hurricane Katrina, more than 60% of the Web sites claiming to offer help to Katrina victims were fraudulent. Before giving to charities, be sure they are legitimate. The Better Business Bureau Wise Giving Alliance ( offers information about real national charities.


  • What other ways can you protect yourself against Internet scams?
Chapter 18

In a manual accounting system, purchases of merchandise may not affect the Merchandise Inventory account until adjustments are made at the end of the period. Many shopping cart technologies offer the ability to interface directly with the firm's accounting system, so that the appropriate general ledger accounts are updated automatically.


  • If online transactions were to update general ledger accounts automatically, what accounts would be affected when a sale is made using a customer's bankcard? (Assume that sales tax is collected from the customer for the sale.)
Chapter 20

When a store like Home Depot decides to launch a Web site for its customers, millions of dollars are spent on new technologies, staff, equipment, and advertising. While the company anticipates increased revenues from the website, these new costs impact the bottom line, or net income.


  • Assume a company's expenses increase by 20% in the year its website is launched. The company's revenue increases by 27% that year. By what percentage has net income increased?
Chapter 21

Investors purchase stock in a company for two kinds of payoffs. In some instances, companies declare and pay dividends to stockholders. In other instances, investors make money only when they purchase the stock at a low price and sell it later at a higher price.


  • stock is traded on NASDAQ. The company has never paid dividends nor does it expect to pay dividends in the foreseeable future. What conditions should exist before a company declares dividends to its stockholders?
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