Term
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Definition
| companies maintain detailed records of the cost of each inventory purchase/sale when it occurs |
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Term
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Definition
| determine cost of goods sold only at end of period |
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Term
| what are the two options for flow of costs |
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Definition
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Term
| how to determine inventory on periodic system |
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Definition
1. $ on hand at beginning
2. add it to cog purchased
3. subtract on hand |
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Term
| what are the adv of a perpetual system? |
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Definition
better control
nvestigate shortages quick
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Term
| assets acquired for use and not resale (eg supplies) |
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Definition
| go to specific asset accounts, not inventory |
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Term
| FOB shipping/destination? |
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Definition
FOB SHIPPING: buyer pays
(inventory debit)
other seller pays
(operating expense acct) |
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Term
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Definition
purchaser will keep if seller reduces price
debits accts payable
credits inventory in $ of discount |
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Term
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Definition
debit accts payable
credits inventory |
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Term
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Definition
credit terms of a purchase on account may permit the buyer to claim a cash discount for prompt payment
*discount price = payment to be made within invoice date |
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Term
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Definition
2% discount if paid within 10 days
otherwise pay in 30 days |
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Term
when invoice is paid within discount period
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Definition
| it decreases inventory (by paying within it reduces cost!) |
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Term
| sales of merchandise have how many entries? |
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Definition
2
debits accts recievable/
cr sales rev
debits cost of goods sold/
credit inventory |
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Term
| what to multiple step income statements do? |
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Definition
hilight components of net income
1. net sales -cgs = gross p
2. gross p - op e = income fr O
3. +/- not from oa. = net income |
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Term
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Definition
| sales rev - returns/all + discounts |
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Term
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Definition
| net sales - cost of goods sold |
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Term
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Definition
| show overall profitability, just merchandising proficiency |
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Term
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Definition
gross profit
___________
net sales
more meaningful than gp and net sales
measures the margin by which selling price exceeds cost of goods sold
(might decline due to increase competition, higher prices buyer cant transfer to consumer) |
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Term
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Definition
net income
___________
net sales
measure of each dollar in sales that results in income/ selling price covers all expenses
(low - grocery
high - tiffany) |
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Term
| quality of earnings ratio |
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Definition
net cash from o.a.
_________________
net income
(less than 1 = aggresive accounting principles, investigate!) |
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