chapter 3 accouting

Define transportation out. Is it a product cost or a period cost up the seller

Transportation how is the freight or shipping cost on Goods. It is a period cost.

what is the purpose of giving a cash discount to a charge customer

cash discounts are offered to customers to encourage prompt payment

what is the advantage of using common size income statements to present financial information for several accounting periods

common size income statement cover several accounting periods help manage meant identify changes and Trends in various operating costs relative to cells. For example, net income may be increasing from year to year, yet maybe decline as a percentage of sales. Comparison of common size income statement over several years will help management identify which expenses have Rising disproportionately with cells and take corrective action.

what types of costs are included in the merchandise inventory account.

cost of the product, transportation in cost, taxing cost, Transit insurance,

Define merchandise inventory.

finished goods that are held for sale to customers

explain the difference between gross margin and Gain

gross margin is net sales less cost of goods sold and relates the sales of primary products. Gain from the sale of an asset is computed by subtracting the cost of the acid from itself price, but a game in refers to profit from an incidental transaction not likely to regularly occur

when are product costs expensed

in the period In which inventory is sold

when are period costs expensed

in the period they are incurred or used

if goods are shipped fob shipping point, which party buyer or seller is responsible for the shipping costs?

it's a goods are shipped fob shipping point the buyer is responsible for the shipping cost

what does the periodic inventory system impose a major disadvantage for management in accounting for lost, stolen, or damaged goods?

periodic inventory system does not separate the cost of loss, damage, or stolen merchandise from the cost of good sold. This is Tim fails to provide management with information necessary to make decisions on controlling such inventory losses.

what is the difference between a product cost and the selling and administrative costs?

product costs are costs associated with kids for resale, usually inventory costs. Selling and administrative expenses, called period costs are costs that are not directly traceable to products, for example operating expenses

what portion of cost of goods available-for-sale is shown on the income statement.

the cost of the items that have been sold are allocated to cost of goods sold (expense) and are shown on the income statement

what portion of cost of goods available for sale is shown on the balance sheet?

the cost of the items that have not been sold are allocated to the merchandise inventory (asset) and are shown on the balance sheet

what is the difference between a multi-step income statement and a single step income statement

the multi-step income statement provides more information on the various results of various business activities. For example, net income from operations is computed separately from other gains and losses. Also, any unusual items are reported separately from normal operating activities. The single step income statement shows as single comparison of total revenues with total expenses

how is the cost of goods available for sale determined

the total of inventory on hand at the beginning of the period plus inventory purchased During the period

Define transportation in is it a product or a period cost

transportation in is the cost of freight and shipping charges on Goods purchased. It is the product cost because it is a part of the cost of the goods purchased

describe how the Perpetual inventory system works. What are some of the advantages of using the Perpetual inventory system? is it necessary to take a physical inventory when using a Perpetual inventory system

under a Perpetual inventory system, the balance in the inventory account is increased each time goods are purchased and decreased each time goods are sold. The major advantages of the Perpetual system is the inventory account will reflect changes to inventory on a continual basis. Other advantage of the Perpetual method is that it allows for better internal control of inventory. a physical inventory should be taken even when the Perpetual method is used. A physical count as necessary under the Perpetual method in order to adjust the balance of the inventory count for items that have been lost stolen or damaged.

why would a seller Grant an allowance to a buyer of the merchandise

when allowances are granted it usually is because customer received in for damaged merchandise. When granting allowance, the seller does not take back the goods and saves the cost of shipping and replacing the product. And addition it saves time in handling the problem.

explain how a periodic inventory system works. What are some of the advantages of using the periodic system what are some disadvantages of using the periodic system is it necessary to take a physical inventory when using the periodic inventory system?

when using the periodic inventory system a temporary account purchases is used to accumulate the purchases transactions for each year inventory is not adjusted until the end of the accounting period at the end of the accounting period, inventory is physically counted and the cost of goods sold is determined by adding the beginning inventory and purchases and then subtracting ending inventory. The inventory is that adjusted, cost of goods sold is recorded and the purchase is accounted is closed.

what is the purpose of preparing a schedule of cost of goods sold?

when using the periodic method of accounting for inventory, the schedule of cost of goods sold is repaired to determine the dollar amount of the cost of sales. It is generally used only for internal reporting purposes.