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17 Cards in this Set
- Front
- Back
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Perpetual Inventory System |
-COGS recorded with each sale -Accounts used and normal balances |
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Inventory Account |
-current asset -debit balance -real/nominal account |
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Sales Account |
-Revenue account -credit balance -Temporary Account (closed to income summary) |
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Sales Returns & Allowances Account |
-Contra Revenue Account -debit balance -temporary account |
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sales discounts account |
-contra revenue account -debit balance -temporary account |
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Closing of temporary accounts |
- Close credit balance accounts Debit Sales Revenue Credit Income Summary - Close Debit Balance accounts Debit Income Summary Credit COGS Credit Sales Discount Credit Sales R&A Credit Operating Expenses (any) - Close Income Summary to Owner Capital Debit Income Summary Credit Owners Capital |
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Periodic Inventory System |
- DO NOT record the cost of inventory with the sale of the inventory. |
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Periodic Inventory System accounts |
-Purchases (debit balance) -Purchase discount (Credit balance) -Purchase R&A (Debit Balance) -Freight In (Debit Balance) |
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Calculate COGS |
1. Purchases - Purchase R&A - Purchase Discount = Net Purchases 2. Net Purchases + Freight-In = COGP 3. Beginning Inventory + COGP = COGAFS 4. COGAFS - Ending Inventory = COGS 5. Net Sales - COGS = Gross Profit |
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Who pays the Freight Cost? |
FOB Destination - Seller pays freight cost FOB Shipping point - Buyer pays freight cost |
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What does FOB stand for |
free on board |
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who has the legal title? |
FOB Destination - Seller has legal title to goods until delievered. FOB shipping point - Buyer has legal title goods as soon as they are shipped (Put on Truck) |
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What are consigned goods? |
Goods held for sale by one party but ownership of goods is retained by another party. |
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FIFO- First In, First Out |
- Calculate COGS ( COGAFS - End Inv = COGS) - Ending Inv use the most recent purchase unit cost - in periods of rising prices, FIFO method results in the inventory value on balance sheet closes to current asset |
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LIFO - Last in First Out |
Calculate total End Inv Value - # of units x the oldest inventory or items purchased unit cost |
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Weight average cost |
total COGAFS (unit cost x # of units) / Total # of units |
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Lower of Cost or Market |
followes the conservitism principle ( taking lower of cost of market) |
