Chapter 5 - Merchandising Operations Flashcards
Merchandising (Merchandise inventory/ inventory)
purchasing products to resell to customers
Retailers
Merchandising companies that purchase and sell directly to consumers
Wholesalers
Merchandising companies that sell to retailers
Cost of Goods sold
total cost of merchandise sold during the period
Gross profit
sales revenue - goods sold
Operating expenses
think of cost to operate
are expenses inccured in the process of earning sales revenue or service revenue
Examples: salaries, advertising, insurance, rent, and depreciation
Operating Cycle
time it takes to go from cash to cash in producing revenues
Perpetual Inventory System
Company = keeps detailed records of each inventory purchase and sale
-continuously shows the QUANTITY and COST of the inventory that should be on hand for every item
Subsidary Ledger
is a group of accounts that share a common characteristic
—> frees the general ledger from the details of individual balances
Control Account
The general ledger account that summarizes the subsidary ledger data
Ex: Merchandise & A/P
not cash.
Control Account balance = total of all the individual inventory account balances
(FOB) Free on Board
the point where ownership = transferred
FOB destination OR FOB shipping point
FOB shipping point
Ownership passes to buyer ONCE goods = placed on the carrier
-Buyer pays for freight cost & is responsible for damages
FOB destination
Ownership passes to buyer ONCE it arrives to its destination
-seller pays the freight & is responsible for the damages
Purchase Return
the purchaser = may return the goods to the seller
Purchase Allowance
Purchaser may choose to keep the merchandise if the seller = willing to grant allowance (deduction) from the purchase price
