Module 5 Flashcards
Formula for Cost of Goods Sold?
COGS= Opening Inventory + Net Purchases - Ending Inventory
Income Statement for Merchandising
Sales - COGS = Gross Profit - Operating Expenses = Net Income
Whats is Credit Period?
It is a period of time when a good sold on account can payback
Sales two contra accounts?
Sales Discounts and Returns
Explain transaction of a perpetual system?
The Inventory account is increased (debited) everytime merchandise is received and the Inventory account is decreased (credited) and the Cost of Goods Sold account increased (debited) with each sale
Tips for a periodic system?
It is a $0 account when COGS and inventory are adjusted. Only goods for resale are classified as ‘purchases’
How do we classify shipping costs?
They go under selling expenses on the income statement
How do we recognize expense at time of purchase?
Dr Supplies (B/S) and Cr Cash
How do we recognize expense when they are used up?
Dr Supplies Expense and Cr Supplies
Balance Sheet Format for Merchandising Company?
Current Assets + Capital Assets
Perpetual System Journal entry when received?
Dr Inventory and Cr Cash
Perpetual System Journal entry when shipped?
Dr COGS and Cr Inventory
