Accounting 201 Chapter 4

Front 1

What is a merchandise company?

Back 1

Accompany that acquires merchandise to resell to customers and earns net income by buying and selling merchandise

Front 2

What is a wholesaler?

Back 2

An intermediary that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers

Front 3

What is a retailer?

Back 3

An intermediary that buys products from manufacturers or wholesalers and sells them to Consumers

Front 4

For merchandiser how do you find net income?

Back 4

Net sales - cost of goods sold = gross profit - expenses = net income

Front 5

What is inventory?

Back 5

Inventory refers to products a company owns and expects to sell in its normal operations

Front 6

What is the Perpetual inventory system?

Back 6

A system that continually updates accounting records for merchandising transactions specifically, for those records of inventory available for sale and inventory sold

Front 7

What is the periodic inventory system?

Back 7

A system that updates the accounting records for merchandise transactions only at the end of the period .

Front 8

What is an invoice?

Back 8

A source document that serves as the purchase invoice of the buyer and the sales invoice for the seller

Front 9

What is contained in an invoice?

Back 9

The seller, invoice date, purchaser, order date , credit terms , Freight terms , Goods , and total invoice amount

Front 10

What are credit terms for a purchaser?

Back 10

The amounts and timing of payments from a buyer to a seller

Front 11

What does eom mean in credit terms?

Back 11

Eom stands for end-of-month as in so many days after the end of the month

Front 12

What is the credit period?

Back 12

The amount of time allowed before full payment is due

Front 13

what is a cash discount?

Back 13

Something sellers can grant to encourage buyers to pay earlier and the buyer views a cash discount as a purchase discount

Front 14

What is the entry to record the purchase of merchandise on account?

Back 14

Debit to merchandise inventory and credit to accounts payable with any added terms

Front 15

Entry to record payment of money owed for merchandise within the discount period

Back 15

Debit to accounts payable ,credit the merchandise inventory for the amount of discount and credit to remaining balance of cash owed

Front 16

What are purchase returns?

Back 16

Refers to merchandise a buyer acquires but then returns to the seller

Front 17

What are purchase allowances?

Back 17

A reduction in the cost of defective or unacceptable merchandise that a buyer acquires

Front 18

Entry to record purchase allowance

Back 18

Debit to accounts payable and credit to merchandise inventory for amount of allowance

Front 19

Entry to record The Return of merchandise

Back 19

Debit to accounts payable and credit to merchandise inventory for amount returned

Front 20

What does fob mean in Freight?

Back 20

Free on board

Front 21

Who pays for fob shipping point / fob Factory?

Back 21

The buyer pays

Front 22

Who pays for fob destination?

Back 22

The seller pays

Front 23

Entry to record payment of freight by buyer

Back 23

Debit to merchandise inventory and credit to cash

Front 24

Entry to record payment of freight by seller

Back 24

Debit to deliver expense and credit to cash

Front 25

Delivery expense is also called what?

Back 25

Transportation out or Freight out

Front 26

What are supplementary records?

Back 26

Supplemental records refer to information outside the usual general ledger accounts

Front 27

Each sales transaction for a seller of merchandise involves what two parts?

Back 27

1. Revenue recognized in the form of an asset from the customer

2. Cost of goods sold incurred for merchandise sold to the customer

Front 28

Entry to record Revenue received

Back 28

Debit to accounts receivable or cash and credit to sales

Front 29

Entry to record cost of goods sold incurred for merchandise sold

Back 29

Debit to cost of goods sold and credit to merchandise inventory

Front 30

What are sales discounts?

Back 30

A discount given to the buyer from the seller for paying within a certain time span

Front 31

Entry to record sales discount given

Back 31

Debit to cash for remainder of amount and debit to sales discounts for Discount amount and credit to accounts receivable

Front 32

What type of account are sales discounts and sales returns and allowances?

Back 32

A contra revenue account

Front 33

What are sales returns?

Back 33

Merchandise that customers return to the seller after a sale

Front 34

What are sales allowances?

Back 34

Refer to reductions in the selling price of merchandise sold to customers

Front 35

Entry to record sales return

Back 35

Debit to sales returns and allowances and credit to accounts receivable for amount of Revenue. Then a second entry to debit merchandise inventory and credit cost of goods sold

Front 36

Entry to record sales allowances

Back 36

Debit sales returns and allowances and credit accounts receivable

Front 37

What is shrinkage?

Back 37

The term used to refer to the loss of inventory and is computed by comparing a physical count of inventory with recorded amounts

Front 38

What is the entry to record shrinkage?

Back 38

Debit to cost of goods sold for amount lost and credit to merchandise inventory

Front 39

What is the difference in the closing entries for merchandise?

Back 39

To remember to close sales, sales discounts, sales returns and allowances, and cost of goods sold