Chapter 5 Flashcards

1
Q

Merchandiser

A

earns profit by buying and selling merchandise

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2
Q

What is Merchandise

A

Products, (called goods), that a company acquires for the purpose of reselling them to customers

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3
Q

What is COGS

A

Cost of Goods sold - is the cost of merchandise sold to customers during a period; also commonly referred to as cost of sales

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4
Q

Wholesaler

A

a company that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers

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5
Q

retail

A

an intermediary that buys products from manufacturers or wholesalers and sells them to consumers

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6
Q

net sales

A

calculated gross sales -(subtract) sales discounts - sales returns - allowances

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7
Q

calculating profit for service company

A

revenues minus operating expenses = profit

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8
Q

calculating profit for merchandiser company

A

net sales minus COGS = gross profit minus operating expenses = profit

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9
Q

gross profit also called gross margin

A

the difference between net sales and COGS ( net sales minus COGS)

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10
Q

products that a company owns for the purpose of selling them to customers

A

merchandise inventory

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11
Q

operating cycle of a merchandiser

A

cash - purchases - merchandise inventory - cash collecting

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12
Q

cycle of credit sales

A

cash - purchases - merchandise inventory - credit sales - accounts receivable - cash collection

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13
Q

beginning inventory

A

merchandise not sold last accounting period

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14
Q

Ending inventory

A

merchandise not sold this accounting period

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15
Q

Net cost of purchases

A

merchandise purchased this accounting period

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16
Q

What are the two types or accounting systems

A

Perpetual Inventory System and Periodic Inventory System

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17
Q

What is Perpetual Inventory System?

A

a method of accounting that maintains continuous records of the cost of inventory on hand and the cost of goods sold

18
Q

what happens when a sale is made in perpetual inventory system

A

the inventory account is debited for the cost of each purchase and a corresponding accounts payable account is credited as items are received from the supplier

  1. the sale to the customer is recorded with a debit to accounts receivable and a credit to sales
  2. the cost of the inventory is recorded as a debit to COGS and the item is removed from the inventory account by crediting the inventory account
19
Q

what is periodic inventory system

A

a method of accounting that records the cost of inventory purchased by does not track the quantity on hand or sold to customers the records are updated at the end of each period to reflect the results of physical counts of the items on hand

20
Q

how to determine end inventory and cost of goods sold

A

company will take a physical count of inventory this will determine the dollar value of the asset inventory on the balance sheet at a period end as well as the COGS on the income statement

MI + purchases - ending MI = COGS

21
Q

MI

A

Merchandise Inventory

22
Q

inventory losses that occur as a result of theft or deterioration

A

called shrinkage

23
Q

nature of an expense

A

a method of classifying an expense based on its basic characteristics or what it is

24
Q

what is an example of identifying based off of nature of an expense

A

expenses are identified on the income statement as a depreciation, rent, property tax, and salaries the nature of the expense is being identified

25
what is function of an expense
describes the grouping of expenses based on their purpose or what they relate to when expenses are grouped by function additional info must be discloses to show nature of expenses within each group
26
whats an example of function grouping
income statement that shows COGS selling expenses and general and administrative expenses
27
what is the full disclosure principle
requires financial statements to report all relevant info about the operations and financial positions of the entity Info that is relevant but not included in the body of the statements is provided in notes to financial statements.
28
Notes to financial statements
and integral part of financial statements that provides relevant info about the operations and financial position of the entity in addition to that contained in the financial statements
29
what are the two general types of multiple step income statements
classifies multiple step format and multiple step format they can be used in both inventory system
30
classified multiple step income statement
and income statement format that shows intermediate totals between sales and profit and detailed computations of net sales and COGS and is used primarily for internal reporting
31
selling ecpenses
the expenses of promoting sales by displaying and advertising the merchandise making sales and delivering goods to customers
32
general and administrative expenses
support the overall operations of a company and include expenses related to accounting, HR and financial management
33
general and administrative expenses provides detail on what?
includes office salaries, office supplies, rent expense
34
multiple step format
used for external reports the functional categories of selling expenses and general and administrative expenses are not included on a multiple step income statement ; operating expenses are listed by nature only
35
single step income statement
another format of external reporting shows items based on their function only includes: COGS and an operating expense and shows only one subtotal for total expenses
36
gross profit margin calculated as
net sales minus COGS divided by net sales = gross profit margin
37
markup percentage
is the average increase in selling price of a product over the cost example: is product cost $10 and retail in $15 your markup is $5 or 5/10 = 50%
38
selling price calculated
selling price = cost x (1+markup %) = 10 x (1+ 0.50) = $15
39
mark up percentage caculations
markup percentage = selling price minus cost divided by cost
40
required selling price
selling price = cost divided by ( 1- target margin %)
41
What is merchandise inventory
Products a company owns for resale to customers
42
How do you say 2/10 n/30
2% 10 net 30 this means 2% discount for 10 days full amount due after 30 days