TOPICAL OUTLINE FOR EXAM 2

TOPICAL OUTLINE FOR EXAM 2 - TOP ICAL OUT L I N E FOR EXAM...

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TOPICAL OUTLINE FOR EXAM 2 Chapter 5 Be able to calculate gross profit o Gross profit: the excess of net sales over the cost of goods sold. Know the basic formats of the single-step and multiple-step income statements o Single-step income statement: only one step, subtracting total expenses from total revenues, is required in determining net income (or net loss). All data are classified into 2 categories: 1. Revenues, which include both operating revenues and nonoperating revenues and gains (e.g. interest revenue and gain on sale of equipment) 2. Expenses, which include cost of goods sold, operating expenses, and nonoperating expense and losses (e.g. interest expense, loss on sale of equipment, or income tax expense) o Multiple-step income statement: 1. Subtract cost of goods sold from sales to determine gross profit. 2. Deduct operating expenses from gross profit to determine income from operations. 3. Add or subtract the results of activities not related to operations to determine net income . Understand the differences between the perpetual and period inventory systems o Perpetual ( a. , ) inventory system: a detailed inventory system in which a company maintains the cost of each inventory item and the records continuously show the inventory that should be on hand. o Periodic inventory system: an inventory system in which a company does not maintain detailed records of goods on hand and determines the cost of goods sold only at the end of an accounting period. o To determine the cost of goods sold under a periodic inventory system, the following steps are necessary: 1. Determine the cost of goods on hand at the beginning of the accounting period.
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This note was uploaded on 01/17/2009 for the course ACC 211 taught by Professor Bunch during the Fall '08 term at SUNY Albany.

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TOPICAL OUTLINE FOR EXAM 2 - TOP ICAL OUT L I N E FOR EXAM...

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