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5.1 Identify the di ff erences between a service business and a merchandising business In the records of the purchaser, entries are required for (a) cash and credit purchases, (b) purchase returns and allowances, (c) purchase discounts and (d) freight costs. In the records of the seller, entries are required for (a) cash and credit sales, (b) sales returns and allowances and (c) sales discounts 5.2 Determine cost of sales under a periodic inventory system The steps in determining cost of sales are (a) recording the purchase of inventory, (b) determining the cost of goods purchased and (c) determining the cost of goods on hand at the beginning and end of the accounting period 5.3 Describe the steps in determining inventory quantities The steps are (1) counting the physical inventory of goods on hand and (2) determining the status and quantity of goods in transit or on consignment 5.4 Identify the unique features of the statement of profit or loss for a merchandising business under a periodic inventory system The statement of profit or loss for a merchandising business contains 3 features not found in a service business’s statement of profit or loss: sales revenue, cost of sales, and a gross profit line. The cost of sales section generally shows more detail under a periodic than a perpetual inventory

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