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16 Cards in this Set
- Front
- Back
Gross profit
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Net sales – Cost of Goods Sold
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Purchases
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is the full cost of buying merchandise for resale.
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Purchase allowance
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is a reduction in purchase price because the item has a defect or was the wrong item ordered.
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Purchase discount
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is a reduction in the initial cost of the merchandise. Usually, it is due to early payment of the debt.
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Transportation-in
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is the shipping cost paid by the buyer for merchandise. Note that this freight payment increases the cost of the merchandise. It is not an expense
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Cost of Merchandise
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is the cost of the merchandise sold to customer. It is usually figured out by Subtracting the sales and allowances and sales discount from purchase then adding the transportation in (increase the Merchandise Inventory)
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Net sales
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is determined by subtracting sales returns and allowances and sales discounts from sales
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Single step
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Groups all expenses in major categories
Subtracts total expenses from Net sales |
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Multi-step
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Isolates Cost of Goods Sold
Subtracts CGS from Net sales to get Gross Profit |
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FOB Destination
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seller pays freight costs and debits Transportation out (expense)
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FOB shipping
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buyer pays freight costs and debits Merchandise Inv.
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Dual nature
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Each transaction affects
Buyer Seller |
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SHRINKAGE
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Recorded inventory does not equal physical inventory
Requires correction |
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Selling Expense
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expenses that are incurred directly in the selling of the merchandise
they include such expenses as salespersons' salaries, store supplies used, depreciation of store equipment, and advertising |
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Administrative expenses
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expenses incurred in the administration or general operations of the business. also known as general expenses.
they include office salaries, depreciation of office equipment, and office supplies used. |
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2/10, n/30 or n/eom
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means2% discount if paid within 10 days, net amount due within 30 days or at the end of the month.
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