Accounting

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Múltiple-step income statement

Gross profit, income from operations, which is gross profit minus operating expenses, net income, which is income from operations plus or minus non operating items

Gross method

Initially record purchases at gross (full) invoice amounts

Merchandise

Goods a company buys to resell

No operating activities

Consist of expenses, revenues, losses, and gains that are unrelated to a company's main operations

Inventory

Costs of merchandise owned but not yet sold. Current asset on the balance sheet

Cost of goods sold

Costs of merchandise sold

Credit terms example

2/10, n/60 means full payment is due within 60 days but the buyer can deduct 2% of the invoice amount if payment is made within 10 days

Sales discounts

A contra revenue account, meaning sales discounts is subtracted from sales when computing net sales

Sales allowance

A price reduction agreed to when a buyer is unsatisfied with the goods

Gross profit

Amount of money left after deducting cost of goods sold from revenue

Net profit

Amount of money left after paying business expeneses

Inventory shrinkage

An adjusting entry to account for the loss of inventory due to theft or deterioration. It is computed by comparing a physical count of inventory with recorded amounts

Closing entries

Differences between merchandisers and service companies in red

Selling expenses

Expenses of advertising merchandise, making sales, and delivering goods to customers

General and administrative expenses

Expenses that support a company's overall operations, including accounting and human resources

Cash discount

Purchases discount on the price paid by the buyer or a sales discount on the amount received for the seller

Operating expenses

Separated into selling expenses and general and administrative expense's

Perpetual inventory system

Updated accounting records for each purchase and each sale of inventory

Periodic inventory system

Updated accounting records for purchases and sales of inventory only at the end of a period


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