Chapter 5- Accounting for Merchandising Operations Flashcards
0
Q
How do you calculate net income?
A
Gross Profit-Operating Expenses
1
Q
How do you calculate gross profit?
A
Sales Revenue-COGS
2
Q
What is an operating cycle?
A
The average time taken to go from cash to cash when producing revenues
3
Q
Who pays the shipping costs for FOB shipping point?
A
The buyer/destination pays
4
Q
Who pays the shipping costs for FOB destination?
A
The seller/shipping point pays
5
Q
What account is debited by the buyer when accounting for FOB shipping point?
A
Merchandise Inventory/Freight In
6
Q
What account is debited by the seller when accounting for FOB destination?
A
Freight Out
7
Q
What is a quantity discount?
A
When a large volume of merchandise is purchased
8
Q
What are purchase/sales discounts?
A
When a discount is given to encourage early payment of an account
