Perpetual Inventory System Flashcards
What are Merchandising Operations?
Purchasing products to resell to customers
Two categories of expenses
- Cost of Goods Sold: cost of merchandise sold
- Operating expenses: incurred in the process of earning sales revenue
Gross profit
Difference between Sales Revenue and Cost of Goods Sold
Perpetual
Inventory changes are recorded in an account on an ongoing (perpetual) basis
Freight Costs
Purchase invoice indicates when ownership of the goods is transferred from buyer to seller
FOB Shipping Point
Buyer accepts ownership (freight in)
FOB destination
Seller pays freight costs (freight out)
Purchase on account
Dr. Merchandise Inventory
Cr. Accounts payable
Credit invoice
Dr. Accounts Payable
Cr. Merchandise inventory
Purchases discount
Dr. Accounts payable
Cr. Bank
Cr. Merchandise inventory
Transportation charges
Dr. Merchandise Inventory
Cr. Bank
Sale on account
Dr. Accounts receivable
Cr. Sales
Dr. Cost of goods sold
Cr. Merchandise inventory
Sale return defective goods
Dr. Sales returns and allowances
Cr. Accounts receivable
Dr. Merchandise inventory
Cr. Cost of Goods sold
Sales discount
Dr. Bank
Dr. Sales discount
Cr. Accounts receivable
