Merchandising Business Flashcards
Profit
Gross Profit (+Income/-Expenses) - Finance Cost
Gross Profit
Net Sales - Cost of Sales or COGS
COGS or Cost of Sales
represents the cost of inventory
Cash Sales
cash - inventory - cash
Sales on Account
cash - inventory - accounts receivable - cash
Source Documents
contain vital information about the nature and amount of the transactions
Sales Invoice
prepared by the seller, sent to the buyer (sold to)
Bill of Lading
document issued by a carrier
Statement of Account
formal notice (customer, address, account number, etc.)
Official Receipt
receipt of cash (payment for)
Deposit Slips
printed forms
indicates that cash and checks were actually deposited and credited
Validated Deposit Slips
written order to a bank
Check
entity issuing the check
Payor
entity receiving the check
Payee
written request to the purchaser
Purchase Requisition
authorization made by the buyer
Purchase Order
containing information about goods received from a vendor, formally records the quantities and description
Receiving Report
form used to notify a buyer that his account is being decreased due to errors
Credit Memorandum
a period of time allowed for payment
Credit Period
usually described as net credit period or net terms
Credit Periid
discounts for prompt payments
Cash Discounts
the period covered by cash discount
Discount Period
encourage buyer to purchase products because of markdowns from the list price
Trade Discounts
designates which party shoulders the cost and whether it is freight prepaid or freight collect
Freight Bill
free on board
FOB
buyer shoulders shipping costs, buyer already owns the goods
FOB Shipping Point
seller bears shipping costs, seller is still the owner
FOB Destination
seller shoulders, seller pays
FOB Destination, Freight Prepaid
buyer shoulders, buyer pays
FOB Shipping Point, Freight Collect
Transportation In (buyer), Transportation Out (seller)
debited
includes all costs incurred to bring the asset to its intended use
Merchandise Inventory
key factor in determining cost of sales
Merchandise Inventory
inventory account is continuously updated, more specific, advisable for firms that sell low-volume, high-priced goods
Perpetual Inventory System
business that sell relatively inexpensive goods; no entries are made to COGS and merchandise inventory
Periodic Inventory System
gross sales - sales returns and allowances - sales discounts
Net Sales
revenues from sale of merchandise are considered to be earned in the accounting period in which the title of goods passes
Accrual Accounting
consists of the total sales for cash and on credit during an accounting period
Gross Sales
contra-income account and deducted from gross sales in the income statement
Sales Discounts
seller issues a credit memorandum after recording this entry
Sales Returns and Allowances
dr. Transportation In/Out
cr. Cash
True
largest single expense; cost of inventory
Cost os Sales / COGS
marchandise inventory, beg + net cost of purchases - ending inventory
Cost of Sales/COGS
purchases - purchases returns and allowances - purchases discounts
Net Purchases
net purchases + transportation in
Net Cost of Purchases
ending inventory of the current period will be the beginning inventory of the next period
True
used only fot merchandise purchased for resale; accumulate the total cost of merchandise purchased
Purchases account
recording merchandise at invoice price
Gross Price Method
discount does not apply to transportation or other charges
True
increased the amount to be paid but has no effect on the cost of purchases
Input Tax
increased the amount collected but not necessarily the sales figure
Output Tax
tax that a business pays for its inputs or purchases
Input Tax
tax added to the price of goods or services
Output Tax
consumption tax on goods and services
VAT
make up the third major part of the income statement; incurred to generate profit
Operating Expenses
expenses related directly to the entity’s efforts to generate sales; salaries & commissions, traveling, advertising, payroll, store supplies used, depreciation of property and equipment; transportation out
Distribution Costs or Selling Expenses
related to the general administration of the business; officers and office salaries, office supplies used, depreciation of office p&e, business tax, professional services, etc.
Administrative Expenses
expenses not related to the central operation of the business
Other Operating Expenses
transfer beginning balance to the Income Summary
dr. Income Summary
cr. Inventory
record ending inventory balance
Dr. Inventory
Cr. Income Summary
beginning inventory and purchases are debit
ending inventory is a credit to income summary
True
Dr. Income Summary
Cr. Beginning Inventory
Dr. Ending Inventory
Cr. Income Summary
Adjusting Entry Method
Dr. Income Summary
Cr. Beginning Inventory
Temporary Accounts with DEBIT balances
Dr. Ending Inventory
Temporary Accounts with CREDIT balances
Cr. Income Summary
Closing Entry Method
used when there are many adjusting entries to be considered
Omission of Adjusted Trial Balance Columns
(IS)
beginning - debit
ending - credit
(BS)
ending - debit
True
an enterprise should present an analysis of expenses using a classification
Revised PAS No. 1
expenses are aggregated or combined in the income statement according to their nature; simple to apply in smaller enterprised
Nature of Expense Method
referred to as “cost of sales” method
Function of Expense Method
classifies expenses according to their function; provides multiple classifications and intermediate differences to highlight significant relationships
Function of Expense Method
Dr. End, Sales, Purchases R&A + Discounts
Cr. Income Summary
True
Dr. Income Summary
Cr. Beg, Sales R&A + Discounts, Purchases, Expenses
True
Dr. Income Summary
Cr. Capital
True
Dr. Capital
Cr. Withdrawals
True
prepared to test the equality of the accoubtd after posting the adjusting and closing entries
Final Trial Balance (Post-Closing Trial Balance)
CONTROL ACCOUNT in the general ledger
INDIVIDUAL customer accounts in a subsidiary ledger
True
individual customer accounts are subsidiary accounts
True
accounts receivable subsidiary ledger may simply br a group of accounts in a binder or it may be a file card arrangement
True
used to yield a detailed breakdown of many general ledger accounts
Control Account-Subsidiary Ledger Technique
journals of original entry other than the general journal that are designed for recording specific types of transactions of a similar nature
Special Journals
sales of merchandise on account (S)
Sales Journal
receipts of cash (CR)
Cash Receipts Journal
credit purchases of merchandise and other items (P)
Purchases Journal
payments of cash (CD)
Cash Disbursements Journal
entries that do not fit in the other journals (GJ)
General Journal
permits division of labor
Major Advantage
lists all credit sales for a period; sales invoice; posted daily
Sales Journal
official receipts, cash register tapes or cash slips, bank credit memorandum
Cash Receipts Journal
balances in the subsidiary ledger
Schedule of Account
Dr. Accounts Receivable
Cr. Sales
Sales Journal
Dr. Cash, Sales Discounts
Cr. Accounts Receivable, Sales, Other Accounts (capital, notes payable, etc.)
Cash Receipts Journal
Dr. Purchases, Office Supplies, Store Supplies, Other Accounts (office equipment)
Cr. Accounts Payable
Purchases Journal
Dr. Accounts Payable, Purchases, Other Accounts (payable, expense, equipment, prepaid insurance)
Cr. Cash, Purchases Discounts
Cash Disbursements Journal
purchases on account; receiving report
Purchases Journal
transactions that cannot be recorded appropriately in a special journal are recorded in
General Journal
balance of accounts receivable control account in the GENERAL LEDGER and sum of individual accounts in tyr ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
True
formalizing the process of verification and approval of payments
Voucher System
takes the place of the PURCHASES JOURNAL; record of all authorized check payments
Voucher Register
substitutes the cash disbursements journal; record of all check payments
Check Register
serially numbered form that identifies the jame and address of the payee
Voucher
vouchers will comprise the
Voucher Package
record payment date and check number which are entered when the voucher is paid
Unpaid Voucher File
absence of entries in the paymeent date and check number columns
Unpaid Voucher
Dr. Purchases, Trans In, Office Supplies, Trans Out, Other Accounts (equipment, etc.)
Cr. Accounts Payable
Voucher Register
Dr. Accounts Payable
Cr. Purchases Discounts, Cash in Bank
Check Register
available fot examination by internal ot external auditors
Paid Voucher File
provides the cornerstone for a simple yet effective accounting system in many small entries
Combination Journal
also used for entries that would normally appear in the general journal such as adjusting and closing entries
Other Accounts Columns
