Accounting Exam 2

Define COGS

Expense

Define Inventory

Asset

Define cash

Asset

Define A/[P

Liability

Define common stock

equity

FIFO Method

First in first out

LIFO

Last in first out

Retailers

buy merchandise from manufacturers or a wholesaler and then sells goods to customers

Wholesaler

buys goods from a manufacturer and sells them to retailers

FOB Destination (Bill of Lading)

means the buyer takes ownership (title) to the goods at the delivery destination point.

FOB Shipping Point

means the buyer takes ownership (title) to the goods after the goods leave the seller’s place of business (shipping point)

Accounting conservatism

means a business should report the least favorable figures in the financial statements when two or more possible options are presented.

COGS formula

number of units sold x unit cost

Ending inventory formula

number of units on hand x unit cost

Gross profit formula (for LIFO of FIFO)

Revenue - COGS

weighted average formula

cost of goods available for sale divided by the number of units available