Cash payments to suppliers

Cash payments to suppliers -...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Cash payments to suppliers.  This represents the amount paid by the company for merchandise it  plans to sell to its customers. It takes a two-step calculation to determine the cash payments to  suppliers of $71,976. First, the $107 increase in the inventory account is added to the amount of cost  of goods sold—found on the income statement—of $70,950 to get $71,057 as the cost of goods  purchased. An increase in inventory means a company purchased more than it sold. Because the  amount paid for merchandise includes what was sold as well as what still remains on hand in  inventory to be sold, the change in inventory effects the cash payments to suppliers. To determine  the amount that has actually been paid for the merchandise purchased, a second step is needed.  The decrease in accounts payable of $919 is then added to the amount of the purchases of $71,057 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/15/2011 for the course ACCT 2310 taught by Professor Staff during the Spring '09 term at Texas State.

Page1 / 2

Cash payments to suppliers -...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online