Chapter 6 Accounting Merchandising PDF

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Chapter 6 Accounting Merchandising...

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Chapter 6 Accounting for Merchandising Business 

Operating cycle: The process by which a company spends cash, generates revenue, and receives cash either at the time the revenues are generated or later by collecting an account receivable

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Gross profit = Sales - cost of merch sold

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Net income = Gross profit - operating expenses

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Merchandising inventory: Merchandise not sold at the end of the accounting period

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Perpetual inventory system: A detailed inventory system in which a company maintains the cost of each inventory item, and the records continuously show the inventory that should be on hand

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Periodic inventory system: Ending inventory and cost of good sold are determined at the end of the accounting period based on a physical count

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Physical inventory: An actual count of all merchandise on hand and available for sale

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Invoice: A bill sent to the buyer by the sender describing the goods or services sold, the quantity, and the price

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Credit terms: Terms for payment on account by the buyer to the seller

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Credit period: The amount of time the buyer is allowed in which to pay the seller

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n/30 : Due in 30 days

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n/eom: Due at end of month.

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2/10, n/30: 2% off if paid within 10 days, must pay within 30 days

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Purchases discount: Discounts taken by the buyer for early payment of an invoice

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Customer discount: Incentive to encourage customers to act in a way benefiting the seller

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Sales discount: A cash discount on sales taken by a customer

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Free on board shipping point: The seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays cost of marine freight transport, insurance, unloading, and transportation from the arrival port to the final destination

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Trade discounts: Discounts from the list or catalog prices of goods, granted by the seller

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Multiple step income statement: Income statement format that shows subtotals between sales and net income, categorizes expenses, and often reports the details of net sales and expenses

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Income from operations = Gross profit - operating expenses Selling expenses

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Incurred directly in the selling of merch. Examples include sales salaries, store supplies used, depreciation of store equipment, delivery expense, advertising Administrative/general expense

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Examples include office salaries, depreciation of office equipment, and office supplies used

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Other income: Income from sources other than the primary operating activity of a business. Examples include income from interest, rent, and gains resulting from the sale of fixed assets

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Other expenses: Expenses that don't come directly from regular operations. Examples include interest expense and losses from disposing of fixed assets.

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Single step income statement Condenses all the multi steps down to a few steps.

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Account form: Balance sheet with assets on the left, liabilities and owner's equity on the right

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Report form: Balance sheet with everything in a downward sequence...