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1
Q

Merchandise purchased (600)

A
  • Expense account used when purchasing goods for the purpose of resale
  • The goods being returned are recorded in a separate revenue account: Purchases returns and similar transactions (608)
  • If the cost of transporting the goods is the responsibility of the company, it must be added at the purchase value. Same accounting treatment for any kind of purchases expense
  • As an incentive to pay early, the company may be offered discounts by the seller. It is recorded in a ledger account called prompt payment discounts on purchases (606)
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2
Q

Merchandise sold (700)

A
  • Revenue account used when selling merchandises
  • Every sale, whether it is made cash or on credit, will be credited to this account
  • Its balance represents, at the end of the accounting period, the GROSS SALES: the total sales made by the organization
  • Sales returns and similar transactions (708): account debited when a defective or unsatisfactory items is returned by the customer
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3
Q

Value added tax

A
  • Standard rate of 21%
  • (472) INPUT VAT- when buying goods or services
  • (477) OUTPUT VAT- when selling goods or services
  • (4750) VAT PAYABLE
  • (4700) VAT RECOVERABLE
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4
Q

Expenses and revenues

A

Temporary accounts

- Absorbed by the (129) at the end of the accounting cycle

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5
Q

4 basic transactions:

A
  1. Purchases
  2. Sales
  3. Payments
  4. Collections
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6
Q

Closing date of the accounting cycle:

A
  1. Balances from ledgers
  2. Adjusting entries
    - changes in inventories (610)
    - VAT liquidation
  3. Closing entries
    - revenue accounts and expense accounts (129- profit of the year)
    - assets, liability, and equity accounts
  4. Financial statements
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7
Q

Retained earnings

A

equity

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8
Q

Creditors

A

assets, rights

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9
Q

Sales

A

revenue

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10
Q

Financial assets

A

= investments

  • LT or ST- depends on the intention of the investor
  • (540) shares- owners
  • (541) bonds- lending money
  • public- government
  • private- cooperation
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11
Q

Finished goods

A

produce our own products to sell

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12
Q

Merchandises

A

bought and sold as they are (supermarket)

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13
Q

Purchase price

A

doesn´t include mandatory charges

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14
Q

Acquisition price

A

final price after mandatory charges (transport etc)

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15
Q

Discounts:

A

Volume: (609) Purchases, revenues- (709) Expenses, sales
Prompt payment: (606) Purchases, revenues- (706) Expenses, sales
Others: (608) Purchases, revenues - (708) Expenses, sales

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16
Q

Containers

A 
Returnable: (406) asset, right
Non-returnable: include in (600), (601)
Obligation containers (437)
17
Q

Calculate bank balance:

A

A= L + Eq + Rv – Exp

18
Q

Net income:

A

Revenue- expenses

19
Q

Temporary accounts

A

expenses and revenues- GROUP 6 & 7

20
Q

Groups:

A
  1. Equity/ non-current liabilities- NC
  2. Non-current assets- NC
  3. Inventories- beginning and end of the accounting cycle
  4. Current assets/ trade
  5. Current liabilities/ financial
  6. Expenses
  7. Revenues
21
Q

Containers- purchases

A
  • (602) when buying containers (not returning all of them)

- (406) a right until returned/bought

22
Q

Containers- sales

A
  • (704) containers and packaging sold (customers decides to keep some)
  • (437) an obligation until we know if the customer returns/buys
23
Q

(300)

A

Merchandises: asset account used for the opening and closing inventory

24
Q

PROFIT/LOSS FOR THE PERIOD (129)

A

Debit side: the merchandise purchased and changes in inventories (when it has debit balance) and other EXPENSE accounts

Credit side: merchandise sold and changes in inventories (when it has credit balance) and other INCOME accounts

  • All income and expense accounts will have zero balance at the end of the year. Its balances are transferred to the account (129), which will indicate the overall results obtained by the company
  • If it has DEBIT BALANCE, there will be a LOSS
  • If it has CREDIT BALANCE, there will be a PROFIT
25
Q

CLOSING ENTRIES

A
  1. Changes in inventories
    (610) Changes in inventories- it is an account that could be considered as an expense or as an income, depending on each situation.
  2. Closing temporary accounts
  • It involves transferring the balances of the temporary accounts to the owner´s equity
  • Each temporary account must be either debited or credited to eliminate its balance, while a corresponding debit or credit is summarized in another temporary account designed exclusively for that purpose. PROFIT AND LOSS, INCOME SUMMARY OR NET EARNINGS SUMMARY

Accounting (5 decks)

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