________ are done by companies and businesses to generate revenues.
New cards
2
Service companies
________ provides a service to their customers (ex: gym memberships, cleaning services).
New cards
3
Selling a service Collecting payment Using the cash to pay for operating expenses
The operating cycle for service companies:
New cards
4
Merchandising companies
________ buy products from manufacturers to resell to their customers.
New cards
5
Buy inventory Reselling inventory Collecting cash Using the cash to pay for operating expenses
The operating cycle for merchandising companies:
New cards
6
Manufactoring companies
________ make their own products to sell.
New cards
7
inventory
The products made by manufacturers and sold by merchandisers is ________. The day you buy ________, it is an asset and once its sold, its an expense.
New cards
8
Sales Revenue
________ is the total selling price of all goods sold.
New cards
9
Cost of Goods Sold
________ is the total cost of all goods sold.
New cards
10
Gross profit
________ represents profit earned before taking into account other expenses such as salaries, wages, depreciation, etc. It is the most important calculation for the Multistep Income Statement.
New cards
11
\
Equation for Gross Profit:
New cards
12
Beginning inventory
________ is the stock of inventory we have at the start of an accounting period.
New cards
13
Purchases
________ are what you buy throughout the year.
New cards
14
Goods Available for Sale
________ is everything you can potentially sell.
New cards
15
\
Equation for Cost of Goods Available for Sales:
New cards
16
\
Equation for Cost of Goods Sold:
New cards
17
Cost of Goods Sold on the Income Statement.
Once goods available for sale are sold, they become ________.
New cards
18
Ending Inventory
________ is the stock of inventory you still have at the end of the accounting period.
New cards
19
\
Equation for Ending Inventory (perpetual):
New cards
20
periodic inventory system
A ________ updates the inventory records for merchandise purchases, sales, and returns ONLY at the END of the accounting period.
New cards
21
self owned, mom and pop shops
The periodic system is used for ________.
New cards
22
physical count of inventory at the end of the accounting period.
For the periodic system, there must be a ________.
New cards
23
Cost of Goods Sold equation
We use the ________ for the periodic system.
New cards
24
it cannot calculate theft
The disadvantage of the periodic system is ________.
New cards
25
perpetual inventory system
When using a(n) ________, inventory is updated every time it is bought, sold, or returned.
New cards
26
bigger businesses like Walmart or Target.
The perpetual system is used for ________.
New cards
27
Ending Inventory equation
We use the ________ for the perpetual system.
New cards
28
physical count at least once a year
For the perpetual system, there must be a ________.
New cards
29
shrinkage
The perpetual system can also estimate ________, which is the loss of inventory from theft, fraud, and error.
New cards
30
\
The equation for shrinkage:
New cards
31
inventory control
A perpetual system has better ________ because it is continuously updating its inventory count.
New cards
32
Free on Board
FOB stands for ________.
New cards
33
FOB shipping point
The sale for ________ is recorded when the seller loads the goods onto the truck. Goods in transit belong to the customer at the point of shipping. "Delivery" occurs when goods are loaded onto the truck.
New cards
34
FOB destination
The sale for ________ is recorded when the goods arrive to the customer. Before this arrival, the goods belong to the seller until they reach their destination. "Delivery" occurs when goods are ready to be unloaded by the buyer.
New cards
35
Purchases Returns and Allowances
________ is a contra account to purchases. It has a normal debit balance.
New cards
36
allowance
If an item is damaged or unsatisfactory, the product can be returned for a full refund or kept by customer with a cost reduction, aka ________.
New cards
37
Purchase discounts
________ are an incentive for prompt payment.
New cards
38
discount period offered.
In 2/30, n/60: The 2 represents the ________.
New cards
39
discount period
In 2/30, n/60: The 30 is the number of days the offer is available, aka the ________.
New cards
40
final payment
In 2/30, n/60: The 60 is the maximum credit period and indicates when the ________ is due.
New cards
41
net purchase
In 2/30, n/60: The "n "is for "________ (after returns and allowances)
New cards
42
One to record the sale at the selling price (debit Cash, Credit Sales Revenue) and one to record cost (debit Cost of Goods Sold, credit Inventory)
Every merchandise sale will have two journal entries and are recorded in a perpetual inventory system:
New cards
43
Sales Returns and Allowances
________ is a contra account to sales and has a normal debit balance.
New cards
44
One to updates sale records (debit Sales R & A, credit Cash) and one to update inventory records (debit inventory, credit Cost of Goods Sold)
There are two journal entries for Sales Returns and Allowances:
New cards
45
Sales Discount
When giving customers a discount, instead of lumping the discount into a sales revenue account, we use a contra-account called ________. It is attached to Sales Revenue and has a normal debit balance.
New cards
46
\
The equation for Gross Profit
New cards
47
\
The equation for Net Sales
New cards
48
bundle
A(n) ________ is packaging items together and selling them for one price to create a "deal "for the customer.
New cards
49
products and services (sometimes together)
Bundles can include ________.
New cards
50
if there is a product and service bundle, the service must be provided before recording revenue.
Bundles with products and bundles with products AND services are different because
New cards
51
The steps for the Five Step Revenue Model
Identify the contract. Identify the seller's performance obligations. Determine the transaction price. Allocate the transaction price to the performance obligation. Recognize revenue when each performance obligation is satisfied.
New cards
52
Multistep Income Statement
The ________ reports alternative measures of income by calculating subtotals for core and peripheral business activities. It contains more than one year for comparative purposes.
New cards
53
Selling, General, and Administrative Expenses
________ groups expenses like salaries, wages, utilities, advertising, rent, and transportation.
New cards
54
Gross profit analysis
________ is used to help compare multistep income statements.
New cards
55
\
Equation for GROSS PROFIT PERCENTAGE %
New cards
56
What the ratio calculated from the Gross Profit % equation can be used for
Analyze the company's operations over the years, compare company to company, and to see if a company is getting enough income to cover its operating expenses.
New cards
57
higher percentage
We want a(n) ________ for our gross profit ratio.
New cards
58
Gross Method
The ________ correlates with the perpetual method.
New cards
59
"wait and see"
The Gross Method can also be called the ________ method because we see if the discount is taken before recording it.
New cards
60
Net Method
The _______ correlates to the periodic method.
New cards
61
"assumption"
The Net Method can also be called the ________ method because we record as if the discount was taken. If the discount is not taken, we update the record.
Studied by 4 people
