42 - Full amount due in 30 days Purchase discounts Company...

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Accounting for Inventory Items held by the company for re-sale Current asset on the Balance Sheet Items sold shifted to Cost of Goods Sold Expense on the Income Statement Sales revenue based on retail price of inventory Cost of Goods Sold based on cost of inventory Gross Profit Sales Revenue minus Cost of Goods Sold Also called Gross Margin Represents markup on products “Gross” because expenses have not been deducted Two Systems Periodic Count items to determine quantity on hand Used for inexpensive items Used by small businesses Low cost Perpetual Running record of inventory kept by computer program Used by large businesses Scanners and bar codes used to record transactions Net cost of purchases Discount terms Companies offer incentive for early payment 2/10, n/30 2% discount if bill paid in ten days
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Unformatted text preview: Full amount due in 30 days Purchase discounts Company receives discount if it makes payment early Reduces cost of inventory Sales discounts Company offers discount to customers for early payment Reduces cash received on accounts receivable Perpetual Entries To record purchases of inventory on account Perpetual Entries To record sale of inventory on account Two entries required Understand the various inventory methods Inventory Costing Methods To determine the cost of inventory sold or on hand, the units are multiplied by the unit cost Inventory items are often purchased at different prices throughout the year Company selects a costing method to determine which unit cost to use...
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42 - Full amount due in 30 days Purchase discounts Company...

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