accounting ch.5
Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in
Inventory.
Net income is Income from operations add (less)
Other revenues and gains, Other expenses and losses
If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales
allowance.
FOB shipping point means that the
buyer pays the freight.
The Sales Returns and Allowances account is classified as a(n)
contra revenue account.
The respective normal account balances of Sales Revenue, Sales Returns and Allowances, and Sales Discounts are
credit, debit, debit.
The operating cycle of a merchandiser is
generally longer than it is for a service company.
The gross profit rate is computed by dividing gross profit by
net sales.
Net income is gross profit less
operating expenses.
A sales invoice is a source document that
provides evidence of credit sales.
A single-step income statement
reports sales revenues and other revenues and gains in the revenues section of the income statement.
An enterprise which sells goods to consumers is known as a
retailer.
The contra revenue account that normally has a debit balance is
sales returns and allowances.
Gross profit is
sales revenue less cost of goods sold.
Perpetual inventory system records
sometimes do not match up with physical inventory due to theft and data entry errors.
The primary source of revenue for a wholesaler is
the sale of merchandise.
To record the sale of goods for cash in a perpetual inventory system
two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.
In a perpetual inventory system, the Cost of Goods Sold account is used
whenever there is a sale of merchandise or a return of merchandise sold.
A merchandising company that sells directly to retailers is a
wholesaler.
A company determines the cost of goods sold each time a sale occurs in
a perpetual inventory system only.
As an incentive for customers to pay their accounts promptly, a business may offer its customers
a sales discount.