Term
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Definition
| Companies that buy and sell merchandise – Walmart, Target, Old Navy, Hollister |
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Definition
| Those that sell merchandise directly to consumers |
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Definition
| Those that sell merchandise to the retailers |
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Term
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Definition
companies maintain a detailed record of cost for each inventory purchase and for each sale therefore giving them an up-to-date detail of the merchandise inventory account
Perpetual provides a better control over inventory although it costs more to maintain. |
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Term
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Definition
companies do not keep a detailed record of the merchandise on hand throughout the period.
Cost of Goods Sold is determined at the end of the accounting period by taking a physical inventory count. |
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Term
| To Calculate Cost Of Goods Sold it is: |
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Definition
| Beginning Inventory + Cost of Goods Purchased – Ending Inventory = COGS |
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Term
Recording Purchases in Perpetual: Buyer
When merchandise is purchased: |
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Definition
Debit Merchandise Inventory
Credit Accounts Payable (or cash) |
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Term
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Definition
| Purchase Returns is simply when someone buys on account and then for whatever returns the merchandise |
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Term
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Definition
| buyer keeps the item but the seller issues them a discount on the price for keeping the item (the item may not have been exactly what was ordered, may be the wrong color, it could have had a flaw) |
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Term
| Recording Returns in Perpetual: |
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Definition
For purchases returns and allowances using the Perpetual Method you simply take the $ amount back out of the merchandise inventory account and accounts payable
Debit Accounts Payable
Credit Merchandise Inventory |
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Term
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Definition
| When the buyer is offered a cash discount to pay the invoice promptly allowing the buyer to save money and the seller to shorten its operating cycle |
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Term
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Definition
| specify the amount of the cash discount that is allowed to be taken and the time period it is offered – as well as the time period the full amount of the invoice should be paid in if they choose not to take the discount. |
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Term
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Definition
| Take a 2% discount on the merchandise if you pay within 10 days and if not the full amount of the invoice is due in 30 days |
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