Chapter 6 Flashcards
A series of activities that a company undertakes to generate revenues and, ultimately, cash
Operating Cycle
Merchandisers report Inventory as a __________, but service companies do not. Service companies often report Supplies, but they differ from inventory because supplies are goods acquired for internal use. Inventory consists of goods acquired for resale to customers.
(1) Current Asset
Service companies earn revenue from ________ whereas merchandisers earn revenue from ______.
(1) Services
(2) Sales
Merchandisers report an expense called _____________, which represents the total cost of all goods sold to customers during the period. Service companies do not incur this expense because they do not sell goods.
(1) Cost of Goods Sold
Three accounts important to a merchandiser:
(1) Inventory
(2) Sales Revenue
(3) Cost of Goods Sold
Reports the merchandiser’s total cost of acquiring goods that it has not yet sold.
Inventory
The total selling price of all goods that the merchandiser did sell to customers during the period.
Sales Revenue
Cost of all goods that the merchandiser did sell to customers during the period.
Costs of Goods Sold
Sales Revenue - Cost of Goods Sold =
Gross Profit
Cost of Goods Available =
Beginning Inventory + Purchases
Goods available for sale sold during the period reported on income statement.
Cost of Goods Sold
Periodic Inventory System Equation:
Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold
Perpetual Inventory System
Beginning Inventory + Purchase - Cost of Goods Sold = Ending Inventory
Updates the inventory records for merchandise purchases, sales, and returns only at the end of the accounting period.
Periodic Inventory System
True or False: To determine how much inventory is on hand and how much inventory has been sold in a periodic inventory system, they require that inventory be physically counted by the employees at the end of the period.
True
