Accounting 201

What is the increase side of sales revenue?

Credit

What is the formula for the net purchases?

purchases - purchase discounts - purchase returns & allowances + freight in

Sales is what type of account?

Revenue

An expense that the business has incurred but not yet paid (and therefore the transaction has not been recorded)

Accrued Expense

A revenue that has been earned but for which the cash has not been collected yet (and therefore the transaction has not been recorded)

Accrued Revenue

The sum of all depreciation expense recorded to date for an asset

Accumulated depreciation

Perpetual inventory system

An inventory system that keeps a running computerized record of merchandise inventory

Periodic inventory system

An inventory system that requires businesses to obtain a physical count of inventory to determine quantities on hand

Inventory is what type of account?

Asset

The asset's cost minus accumulated depreciation

Book value (of a plant asset)

Accumulated depreciation is what type of account?

Contra-asset

The cost of the inventory that the business sold to customers

Cost of goods sold

Which of the following accounts would be closed at the end of the year using the perpetual inventory system?

Cost of goods sold

What is the increase side of accumulated depreciation?

Credit

What is the normal balance of accumulated depreciation?

Credit

What is the normal balance of refunds payable?

Credit

What is the normal balance of sales?

Credit

Debts due to be paid with cash or with goods and services within 12 months

Current Liability

Assets that are expected to be converted to cash, sold, or used up during the next 12 months

Current asset

What is the increase side of cost of goods sold?

Debit

What is the increase side of inventory

Debit

What is the normal balance of cost of goods sold?

Debit

What is the normal balance of estimated returns inventory?

Debit

What is the normal balance of inventory?

Debit

The allocation of a plant asset's cost over its useful life

Depreciation

You sold inventory, but the inventory was not "as ordered". The buyer sends the inventory back to you. What account do you credit when the product is returned to your inventory?

Estimated Returns inventory

Gross profit

Excess of net sales revenue over cost of goods sold

Cost of goods sold is what type of account?

Expense

Operating expenses

Expenses, other than cost of goods sold, that are incurred in the entity's major ongoing operations

Sales revenue minus cost of goods sold

Gross profit

What is the order of the subtotals that appear on a multi-step income statement?

Gross profit, operating income, total other income and expenses, net income

A temporary "holding tank" account into which revenues and expenses are transferred prior to their final transfer to the Capital account

Income summary

All the goods that the company owns and experts to sell to customers in the normal course of operations

Inventory

What is the formula for the gross profit

Net sales revenue - cost of goods sold

Accounts that are not closed at the end of the period (assets, liabilities, and the capital account)

Permanent accounts

Long-lived tangible assets (such as land, buildings & equipment) use in the operation of a business. Also known as "property, plant & equipment", and "fixed assets"

Plant asset

You purchased inventory, but the inventory is not "as ordered". The seller reduces your bill as an incentive for you to keep the goods

Purchase allowance

You purchased inventory, but the inventory is not "as ordered" You give the inventory back to the seller

Purchase return

The amount that a merchandiser earns from selling its inventory

Sales Revenue

You sold inventory but the product was not "as ordered" by your customer. You reduce the amount that you will charge the customer as an incentive for the customer to keep the goods

Sales allowance

You sold inventory on account. The customer pays after the discount period, so you adjust which revenue on account

Sales discount forfeited

Consists of drawing, revenue, and expense accounts related to a particular accounting period. These accounts are closed at the end of that period

Temporary accounts

Cost of goods sold

The cost of merchandise inventory that the business has sold to customers

Vendor

The individual or business from whom a company purchases goods

The individual or business from whom a company purchases goods. A merchandising company mainly purchases inventory from these individuals/ businesses

Vendor

A internal tool used to calculate adjusting entries. Also used to help create financial statements. Contains columns for trial balance, adjustments, adjusted trial balance, income statement, and balance sheet

Worksheet