Unit 2 Chapter 12: Reporting and Managing inventory Flashcards

1
Q

Net Sales

A

Total Sales less Sales returns

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2
Q

Cost of goods sold

A

A heading used in the income statement for all costs incurred to bring inventory into a location and condition ready for sale

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2
Q

Adjusted gross profit

A

Gross profit less inventory loss (or plus inventory gain)

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3
Q

Why is the purchase of inventory not classified as an expense?

A

The purchase of inventory does not involve an outflow of economic benefits because it does not decrease assets overall.

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4
Q

Equation for gross profit in income statement

A

Gross profit = Net sales less Cost of Good Sold

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5
Q

Gross profit Margin

A

A profitability indicator that measures the average mark up by calculating the percentage of Net Saless revenue that is retained as Gross Profit

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6
Q

Equation for Gross profit Margin

A

Gross Profit/Net sales x100

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7
Q

Inventory sheet

A

A listing of the quantity and value of each line of inventory on hand

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8
Q

Inventory turnover

A

An efficiency indicator that measures the average number of days it takes for a business to convert its inventory into sales

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9
Q

Eqaution for inventory turnover

A

(Average inventory x 365)/Cost of goods sold

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10
Q

Formula for average inventory

A

Inventory at start + inventory at end/2

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11
Q

2 methods for improving inventory turnover

A
  1. Increasing Sales through increase advertising and decreasing sales prices
  2. Decreasing inventory holdings
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12
Q

2 Strategies to manage inventory

A
  1. Rotate inventory
  2. Ensuring inventory is up to date
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