Financial Accounting Notes 2

Financial Accounting Notes 2 - Accounting Notes •...

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Unformatted text preview: Accounting Notes • Merchandise inventory – goods are purchased in finished form for resale o Balance sheet only has one account • Manufactured inventory – direct materials are covered through work in process (by adding direct labor and overhead) into finished goods o Balance sheet has three inventory accounts – direct material, work in process, finished goods o Inventory costs includes all costs associated with getting goods into finished form • Operating cycle for a credit sale o 1. Purchase goods for resale o 2. Sell goods on account o 3. Collect accounts receivable o 4. Use cash to buy additional inventory • Contra sales accounts o Sales returns o Sales discounts and allowances 2/10 net 30 • Perpetual inventory and allowances o Inventory balances get updated after every purchase and every sale • Periodic inventory system o Periodic physical counts are used to determine inventory • Cost of goods sold (COGS) o Cost associated with goods sold during the period o Beginning inventory + purchases = cost of goods available for sale (COGM) o COGM – ending inventory – COGS o Cost of goods purchased = purchases (at invoice) + shipping in – purchase discounts – purchase returns and allowances...
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Financial Accounting Notes 2 - Accounting Notes •...

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