MERCHANDISING BUSINESS Flashcards
Simply refers to all goods that have been purchased but not yet sold
Inventory
Inventories are accounted for using either of the following inventory systems:
- Perpetual Inventory System
- Periodic Inventory System
Under this system, the “inventory” account is updated each time a purchase or sale is made. Thus, the “Inventory” account shows a continuing or running balance of the goods on hand.
Perpetual Inventory System
Under this system, the “Inventory” account is updated only when a physical count of inventory is performed. Thus, the amounts of inventory and cost of goods sold are determined only periodically.
Periodic Inventory System
The account used to record purchases of inventory under periodic inventory system.
- Purchases
The account used to record the shipping cost incurred on purchases of inventory under periodic inventory system
- Freight-in
The account used to record returns of purchased goods to the supplier.
- Purchase returns
the account used to record cash discounts availed of on the purchased goods.
- Purchase discounts
“Freight-in” is an _______ _______ (addition), while “Purchase returns” and “Purchase discounts” are ______ _______ (deductions), to “Purchases” when computing for “Net purchases.”
adjunct account
contra accounts
Include both cash sales and credit sales.
- Sales
The account used to record goods returned by customers
- Sales returns
The account used to record cash discounts given to customers
- Sales discounts
