Unit 6 - Accounting for Merchandise

There won't be a multiple choice or fill in the blanks questions on the quiz?

What are 2 things that = gross profit

• Net sales - Costs of goods sold (COGS)

• Net Income + operating expenses

Sales returns & Allowances account has a credit balance. T or F

False, it has a debit balance

To get COGS in a Schedule of COGS sheet, what is the calculation?

Cost of merchandise available for sale - Ending inventory

To get Cost of merchandise available for sale, on a schedule of COGS? What do you do?

Beginning inventory + Total cost of merchandise purchased

What do you do to get net income on the income statement (U6 style income statement)?

Gross Profit - Total Expenses

When do you use COGS in a perpetual inventory?

When we need to record the original price of a product of what it costed before we sold it

When do we use sales?

When we sell things, applies to both inventories

When do we use accounts receivable?

On both inventory, when a customer owes us money or we make a sale

When do we use cash?

In periodic or perpetual inventory, when we issue a cheque, or receive it from a customer, or if it says something like “Paid with/on cash”

When do we use HST Refundable, and payable?

HST Refundable: When we get HST and we need to pay it, or when we pay for something, or when we return something

HST Payable: When we collect taxes from customers and then pay it to the government

When do we use purchase discounts?

When we bought something that had a discount on it, on periodic inventory only!

When do we use sales Returns & Allowances?

When a customer returns things to us, applies to both inventory’s!

When do we use purchase Returns & Allowances?

When we return something, on periodic inventory only!

When do we debit/credit HST Payable or HST refundable?

• Credit HST Payable when you collect tax, Debit Payable if customer returns something that had HST tax on it (When sales are made)

• Debit HST refundable when you pay tax on something, Credit it if you returned something that had tax on it (When purchases are made)

If you bought/paid merchandise inventory, does merchandise inventory gets credited or debited?

Debited, also when a customer returns goods to us that had merchandise, like issued a credit invoice for $700 to A. Chambers for goods returned, cost of merchandise is 40% of sales price

If we issue a cheque, a sales, or credit invoice, and it says to customer ___ for $175 plus tax (HST 13%), what accounts are affected and by how much?

Cheque: Cash, $175 credit

Sales: Sales, credit $175

Credit invoice: A customer is returning something, Accounts Receivable gets credited, and HST payable gets debited since a customer is returning something to us that had HST

When do we use Delivery expense?

On both inventory’s,when were paying to ship goods to our clients

When do we record transportation in?

Only on periodic because on perpetual, it is recorded in merchandise inventory. If your client ships goods to you and you pay the carrier. Ex: Received $95 Invoice from Budget delivery

When does merchandise inventory gets credited?

When we sell goods and COGS gets debited. Ex: Sold goods to A. Chambers, or Issued Sales Invoice to customer

When does COGS gets debited and credited

Only on perpetual inventory!

Debited: When inventory is sold or issued to a customer

Credited: when inventory is returned

When do we use sales discount?

On both inventories, when a customer purchased/paid something that had a discount on it, Ex: Received cheque from J. Johnson. Has a debit balance to it!