Study Sheet for Accounting Test 2

Study Sheet for Accounting Test 2 - Study Sheet for...

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Study Sheet for Accounting Test 2: Ch 5, 6, 7, 8 Chapter 5 Sales Revenue - The primary source of revenue for merchandising companies is the sale of merchandise. --A merchandising company has 2 categories of expenses: the cost of goods sold and operating expenses. Cost of Goods Sold - The total cost of merchandise sold during the period. This expense is directly related to the revenue recognized from the sale of goods. Sales Revenue- LESS- Cost of Goods Sold- EQUALS -Gross Profit- LESS -Operating Expenses- EQUALS -Net Income --Companies use 2 systems to account for inventory: Perpetual Inventory System or a Periodic Inventory System Perpetual Inventory System - Companies maintain detailed records of the cost of each inventory purchase and sale. These records continuously—perpetually—show the inventory that should be on hand for every item. Under this system, a company determines the cost of goods sold each time a sale occurs. Periodic Inventory System - Companies do not keep detailed inventory records of the goods on hand throughout the period. They determine the cost of goods sold only at the end of the accounting period. At that point, the company takes a physical inventory count to determine the cost of goods on hand. To determine the cost of goods sold under a periodic inventory system, the following steps are necessary 1) Determine the cost of goods on hand at the beginning of the accounting period 2) Add to it the cost of goods purchased 3) Subtract the cost of goods on hand at the end of the accounting period --Perpetual has no end of period entry, Periodic has to compute and record cost of goods sold at the end of period --Companies record cash purchases by an increase in Merchandise Inventory and a decrease in Cash. Purchase Invoice - Indicates the total purchase price and other relevant information. Dr Merchandise Inventory Cr Accounts Payable (To record goods purchased on account from PW audio Supply) --Under the Perpetual Inventory System, companies record purchases of merchandise for sale in the merchandise Inventory account. Dr Merchandise Inventory
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Cr Cash (To record buyers payment of freight on goods purchased) Dr Freight-out Cr Cash (To record sellers payment of freight on goods sold) Dr Accounts Payable Cr Merchandise Inventory (To record return of goods purchased) --2/10, n/30 (two-ten, net thirty) 2% discount if paid within 10 days, otherwise its due in 30
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Study Sheet for Accounting Test 2 - Study Sheet for...

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