Chapter 3 Flashcards
merchandising business
generate revenue by selling goods
the goods purchased for resale
net income is
revenue minus expenses
accounts payable
money a company owes
inventory transactions
purchase and sell
transportation/ shipping cost, discounts
cost of sales
indicates how much a retail or wholesale business spends on the products it purchases from suppliers for resale.
new vehicle, used vehicle
gross profit
total cost of sales
selling and administrative costs
costs not included in inventory sometimes called period costs
SG&A often includes rent, utilities, legal fees and insurance.
balance sheet holds the
inventory which is sold, becoming cost of sales (selling price) on the income statement
perpetual inventory system
inventory is perpetually (continuously) throughout the accounting period
inventory increased for
merchandise/ purchased
inventory decreased for
merch sold
purchasing inventory often involves (4)
1) return inventory or receiving purchase allowances
2) taking purchase discounts
3) incurring transportation costs
4) recognizing inventory shrinkage
- a deduction from the invoice price granted
FOB
Free on Board
shipping point or destination
- transport-in: FOB shipping point, pay transportation
- transportation-out: FOB destination means seller is responsible for the freight cost
- Freight cost: the amount paid to a carrier company for the transportation of goods from the point of origin to an agreed location.
merchandising business include
retail companies and wholesale companies to sell merchandise inventory
merchandise inventory is an
asset
manufactures may not have high margins that is the
dealer
inventory costs are
product costs
- price of goods purchased
- handling and shipping costs
- transit insurance
costs not included in inventory are
selling and administrative costs
asset account:
expense account:
merchandise inventory
costs of goods sold
difference between sales revenue and cost of goods sold is
gross margin or gross profit
modern companies record their inventory through the
perpetual inventory system
gross margin percentage is found by
total revenue - cost of goods sold = gross margain
gross margin - all other expenses = operating income (net income)
(total revenue - COGS)/ net sales x 100
find return on sales %
operating profit/ net sales
signature card
signatures of the people authorized to sign checks
bank statement
checking accounts- report the beginning balance, additions for customer deposits, subtractions for the payment of checks
bank statement debit memos; describe transactions that reduce the customer account balance (bank liability)
bank statement credit memos; describe activities that increase customers account balance (banks liability)
bank reconciliation
explain the differences between the cash balance from the bank statement and the cash balance recorded in the depositors accounting records
begins with unadjusted bank balance:
the cash balance recorded by the recorded by the bank
final total is the true cash balance
the true cash balance
add current non-cash assets together and subtract from the total current assets
TCB= non-cash assets - total current assets