Accounting sales quiz

periodic inventory system

• Used by small businesses with lower sales volume

• Inventory is counted periodically, not as transactions are made

• Not popular with increase in computerized technology

• Inventory is not constantly updated 

  • therefore it is not as accurate

  • Greater chance of errors

perpetual inventory system

• Maintains a running count of the amount of inventory on hand using a Point of Sale (POS) system

• Inventory must be counted at least once a year

• Keeps inventory count up to date and accurate

• Products are given barcodes

FOB shipping point

• The transportation cost on purchased goods

• BUYER PAYS FOR TRANSPORTATION COST

• Debits Inventory & credits cash or accounts payable for the freight bill as the BUYER

• Becomes part of the cost of the inventory

• Most common

FOB destination

• The transportation cost on goods sold

• SELLER PAYS FOR TRANSPORTATION COST 

• Freight Out is a Delivery expense

• Debit Delivery Expense as the SELLER

Cost of goods sold

• created by a sale. An entity’s cost of its inventory that has been sold to its customers. Also known as cost of sales.

  • A merchandiser’s majors expense

sales return

If the customer returns goods

sales allowance

Reduction of cash collected from a customer

sales discount

If a customer pays within the discount period

• contra revenue

sales revenue

The amount a business earns from selling merchandise inventory

• revenue account

sales return and allowances

• contra revenue

net sales

Amount of sales a business made minus sales discounts and sales returns & allowances