Chapter 5 Flashcards
A business that sells merchandise, or goods to customers
Merchandiser
An asset account for the merchandise that a business sells to a customer
The merchandise Inventory
A type of merchandiser who bus goods from a manufacturers and then sells them to retailers
Wholesaler
A type of merchandiser who buys merchandise either from a manufacturer or a wholesaler and then sells those goods to consumers
Retailer
What are the 3 steps to a merchandisers operating cycle
- Purchase inventory from a vendor
- Sell inventory to a customer
- Collect cash from the customer
The individual or business from whom a company purchases goods
Vendor
The cost of the merchandise inventory that the business has sold to customers
Cost of goods sold
What is gross margin and what is the formula
The extra amount the company receives from the customer over what the company paid to the vendor. Net sales minus cost of goods sold
Expenses, other than Cost of Goods Sold, that are incurred in the entity’s major ongoing operations
Operating expenses
What are the two main types of inventory accounting systems that are used.
- Periodic inventory system
- Perpetual inventory system
A seller’s request for payment from the purchaser
invoice
A situation in which sellers allow purchasers to return merchandise that is deflective, damaged, or otherwise unsuitable. Transaction between suppliers and merchandisers
Purchase return
An amount granted to the purchaser as an incentive to keep goods that are not as ordered
Purchase allowance
A discount that businesses offer to purchasers as an incentive for early payment
Purchase discount
The payment terms of purchase or sale as stated on the invoice
Credit terms
When the buyer takes ownership to the goods when the goods leave the sellers place of business and pays freight
FOB Shipping point
When buyer takes ownership to the goods at the delivery destination point and seller pays freight
FOB destination
Transportation cost to ship goods to the purchaser’s warehouse: therefore it is freight on purchased goods
Freight in
Transportation cost to ship goods out of the sellers warehouse. Freight on goods sold
Freight out
The amount a merchandiser earns from selling its inventory.
Sales Revenue
Reduction in the amount of revenue earned on sales for early payment
Sales discount
What does a discount of 3/10 n/30 mean
A discount of 3 percent if paid in 10 days, payment in full due in 30 days
Decreases in the seller’s receivable from a customer’s return of merchandise or from g the customer an allowance from the amount owed to the seller
Sales returns and allowances
A reduction in the amount owed by a customer due to the return of merchandise
Sales return
A reduction in the amount owed by a customer that does not involve the return of merchandise inventory
Sales allowance
The loss of inventory that occurs because of theft and damage
inventory shrinkage
Four steps for closing accounts of merchandiser
- Make revenue accounts equal 0
- Make expense accounts equal 0
- Make the income summary equal 0 via retained earnings
- Make dividends equal 0
The amount a company has earned on sales after returns, allowances, and discounts have been taken out. State formula
Net Sales Revenue
net sales = sales revenue - sales returns - sales discounts
Income statement format that contains subtotals to highlight significant relationships
Multi-step income statement
Operating expenses related to marketing and selling the company’s goods and services
selling expense
Operating expenses incurred that are not related to marketing the company’s goods and services
administrative expenses
Measures the results of the entity’s major ongoing activities. State the formula
Operating Income
Revenues or expenses that are outside the normal day to day operations
other income and expenses
Expense incurred by a corporation related to taxes
income tax expenses
How do you calculate gross profit percentage
Gross profit/net sales revenue
