Accounting
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
