Chapter 4 - Accounting for Merchandising Operations Flashcards
Merchandise
refers to products, also called goods, that a company buys to resell
Merchandiser
earns net income by buying and selling merchandise. Can be wholesalers or retailers
A ______ buys products from manufacturers and sells them to retailers.
wholesaler
A ______ buys products from manufacturers or wholesalers and sells them to consumers.
retailer
Revenue from selling merchandise is called ________ , and the expense of buying and preparing merchandise is called __________.
sales ; cost of goods sold
Gross profit (or margin)
net sales minus costs of goods sold
Inventory
refers to products that a company owns and intends to sell.
Operating Cycle for a Merchandiser
1) Purchases
2) Inventory
3) Credit Sales
4) A/R
5) Cash collection
Computation of Merchandise Available for Sale (MAS)
Beg. inventory + Net purchases = MAS
Computation of COGS
Beg. inventory + Net purchases - Ending inventory = COGS
Computation of Gross profit
Net Sales - COGS = Gross profit
Perpetual inventory system
updates accounting records for each purchase and each sale of inventory
Periodic inventory system
updates accounting records for purchases and sales of inventory only at the end of a period
Shrinkage
the loss of inventory, including theft and deterioration, computed by comparing a physical count of inventory with recorded amount
Multi-step income statement
details net sales and expenses and reports subtotals for various types of items
