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Merchandise Income Statement includes?
Sales- Sales Returns & Allowances - Sales Discounts = Net Sales
Net Sales - Cost of goods sold = Gross Profit
Cost of Sales (Cost of Good Sold) is usually a merchandise companies largest expense.
What are the two inventory systems?
Perpetual - update inventory records with every transaction
Periodic - update inventory records at the end of the period (month)
What does FOB Shipping Point mean ?
buyer takes ownership of inventory when product leaves sellers dock and buyer usually pays the freight
What does FOB Destination mean ?
buyer takes ownership of once it is received at buyer's dock and seller usually pays the freight
> If seller prepays the freight, usually the seller will add the freight cost to the buyers invoice.
What does Freight- In mean?
Is the cost of transportation for purchases and is part of inventory cost
What are the accounts used to record the payment of cash for transportation in (Freight-In)?
Inventory Dr
Cash Cr
What are the accounts used to record the payment of cash for transportation out (Freight-Out)?
Outbound Dr
What do Purchase Returns and Allowances and Purchases Discounts do?
Reduces the cost of inventory and so Inventory is credited
What are Sales Discounts?
When the seller offers an incentive to the buyer to pay an invoice early
Terms of 2/10, n/30 = the buyer can take a 2% discount on the invoice total if the invoice is paid within 30 days.
Payment Formula - (Purchase $ - Returns $ + Freight Cost) - {(Purchase $ - Return $) X discount %} = net payment amount
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