Acc 201 Chapter 6 final exam

Acc 201 Chapter 6 final exam - Measures how much of every...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 6: Sales Revenue FOB Shipping vs. destination point o FOB shipping point : Free on Board at the shipping point – the buyer is paying the freight so they take control when the freight is shipped so they take control when the good are shipped = A Sale. o FOB Destination : Free on Board @ Destination – seller is paying freight so not a sale till the good reaches the destination. Difference between net and gross sales o Net Sales: Net Sales = Sales revenue – Credit card/sales discounts – Sales Returns o Gross Sales: Gross Sales = Net Sales – Cost of good sold Bad Debt Expense (Doubtful Accounts Expense, Uncollectible Accounts Expense, Provision for  Uncollectible Accounts)  -  Expense associated with estimated uncollectible accounts receivable. Allowance for Doubtful Accounts: Contra-asset account containing the estimated uncollectible accounts receivable. Gross Profit Percentage ration –
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Measures how much of every sales dollar is gross profit. It reflects. It reflects a companys ability to charge premium prices and produce good and services at low cost. All other things equal, a higher gross profit results in higher net income. Gross profit percentage = Gross profit / (divide) net sales Receivables Turnover ratio reflects how many times average trade receivables are recorded and collected during a period. A higher ratio, the faster the collection of recievables. A higher ratio benefits the company because it can invest the money collected to ear interest income or reduce borrowings to reduce interest expense. Overly generous payment schedules and ineffective collection methods keep the receivables turnover ratio low. Receivables Turnover ratio = Net Sales/ (divide) Average Net Trade Accounts Receivable...
View Full Document

This note was uploaded on 03/19/2008 for the course ACCT 201 taught by Professor Anothony during the Fall '07 term at Michigan State University.

Ask a homework question - tutors are online