ACC120-notesonCh6 - Accounting 120 Chapter 6 & 7 Notes...

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Unformatted text preview: Accounting 120 Chapter 6 & 7 Notes Differences Between a Service Company and a Merchandising Company Primary Source of Revenue Income Measurement for Merchandise Companies Sales revenue less cost of goods sold equals gross profit less operating expenses equals net income (loss) Multiple step income statement Evaluating Profitibility Gross Profit Rate Gross Profit/Net Sales Gross Profit Rate - The percent at which each sales dollar exceeds the cost per dollar. Gross Profit is also called markup Profit Margin Ratio Net Income/Net Sales o measures the income earned per dollar of net sales Specific Identification matches or identifies each unit of inventory with its actual cost.- practicable for companies selling unique, expensive products First in, first out method assume that the first units purchased are the first units sold Average Cost Method Perpetual Inventory Management System Every purchase and every sale gets picked up by the computer system. When we get to the end of the year, in a perfect world, cost of goods sold and inventory should correct. The business still must count for inventory once a year because of: o Theft o Errors o Spoilage o Damage Periodic o Record purchases and only records and keeps track of slaes revenue. We do not at the time of the sale, record the Dr Cr A/R 20 Sales revenue 20 Cost of goods sold 12 Inc. Statement Inventory 12 Bal. Sheet (periodic will not record this second journal entry) Beginning Inventory + Net purchases...
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This note was uploaded on 10/22/2011 for the course ACCT 3551 taught by Professor Brown during the Spring '11 term at UNC.

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ACC120-notesonCh6 - Accounting 120 Chapter 6 & 7 Notes...

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