test 4 Flashcards
Purchase inventory
Debit: Merchandise Inventory
Credit: Accounts Payable (or Cash)
Return Inventory
Debit: Accounts Payable (or Cash)
Credit: Merchandise Inventory
Payment of Inventory on Account
Debit: Accounts Payable
Credit: Cach
Shipping and Handling
Debit: Merchandise Inventory
Credit: Accounts Payable (or Cash)
One supplier: one invoice ; Two suppliers: two invoices
Payment with Discount
Debit: Accounts Payable
Credit: Cash
Credit: Merchandise Inventory
Purchase Allowances
Debit: Accounts Payable
Credit: Merchandise Inventory
Cash Sales
Debit: Cash
Credit: Sales Revenue
Debit: COGS (Cost of Goods Sold)
Credit: Merchandise Inventory
Credit Sales (on Account)
Debit: Account Payable
Credit: Sales Revenue
Debit: COGS
Credit: MErchandise Inventory
Sales Returns
Debit: Sales Returns & Allowances
Credit: Cash/Accounts Receivable
Debit: Merchandise Inventory
Credit: COGS
Sales Allowance
Debit: Sales Returns and Allowances
Credit: Cash / Accounts Receivable
Sales Discounts
Debit: Cash
Debit: Sales Discounts
Credit: Accounts Receivable
Delivery to Purchaser
Debit: Delivery Expense
Credit: Accounts Payable
Overstated inventory
Debit: COGS
Credit: Merchandise Inventory
To adjust inventory after physical count
Understated inventory
Debit: Merchandise Inventory
Credit: Cost of Goods Sold (COGS)
To adjust inventory after physical count
Inventory Shrinkage
Recording value of missing inventory - overstated
Debit: COGS
Credit: Merchandise Inventory
To adjust inventory after physical count
Inventory Correction
Recording a correction if the count is higher than the Merchandise Inventory
Debit: Merchandise Inventory
Credit: Cost of Goods Sold (COGS)
To adjust inventory after physical count
FOB
Stands for Free on Board
FOB Destination
Freight terms which stipulate that the transfer of title to (and responsibility for) goods occurs at the purchaser’s door/dock/warehouse (Free @ Destination = purchaser is free of paying for)
FOB Origin
Freight terms which stipulate that the transfer of title to (and responsibility for) goods occurs at the seller’s door/dock/warehouse (Free @ origin = Seller is free of paying for)
Multi Step Income Statement
Step 1: Net sales (=Sales Revenue - Sales Returns Allowances - Sales Discount)
Step 2: Gross Profit (= Net Sales - COGS)
Step 3: Operating Income (=Gross Profit - Operating Expenses)
Step 4: Net Income (= Operating Income + Other Income + Other Expenses)
NGON - “Never Go Out Naked”
Gross Profit Margin
Gross Profit / Net Sales * 100%
used to compare profitability
Net sales
Net sales = Sales Revenue - Sales Returns Allowances - Sales Discount
Gross Profit
Gross Profit = Net Sales - COGS
Operating Income
Operating Income =Gross Profit - Operating Expenses
Net Income
Net Income = Operating Income + Other Income + Other Expenses
