Chapter 6 Flashcards
What is inventory?
Goods and materials that a business holds to resale or use for production.
What account is inventory considered?
Current Asset
What sells services, collects cash, and pays operating expenses
Service providers
Do service providers have inventory?
No
What do merchandising companies do?
Buy inventory, sell inventory, collect cash, and pay operating expenses
The company has inventory accounts called raw materials, work-in-process, and finished goods.
Manufacturer
What are wholesalers?
The company is a “middle-man”, buying from a supplier and selling to other companies
The company buys completed products and sells them to consumers
Retailer
What is overhead?
Ongoing expenses of operating a business that are not directly tied to producing goods or services.
In what accounts are overhead and labor added to?
Work in Process (A)
Where accounts does the credit amount of raw materials goes to?
Work in Process
If I had $60 credited in a work in process account, where would that amount end up?
Finished goods
Define Product Costs
All the cost incurred to manufacture/make a product so that it can be sold
What is period costs?
expenses that are not directly tied to the production of goods or services and are incurred over a specific period of time
What does it mean to capitalize a cash payment?
Record it as an asset on the balance sheet rather than expense it immediately
