Accounting Unit 2 - Chapter 1-3

Accounts Payable - Business name is not on top.

Accounts Receivable - Business name is on top.

Any addition or subtraction of inventory is recorded in the inventory stock card.

Cost of Sales can be calculated by adding the cost of sales in the CRJ to the cost of sales in the SJ.

Inventory is no longer put in the income statement as it is already calculated in the stock card.

Cost of Goods Sold - the cost of sales plus any additional cost to get the inventory into a condition and position for sale.

For example, this includes costs such as:

• Freight inwards

• Cartage inwards

• Customs Duty

• Stock transit insurance

Gross Profit - The profit that a company makes after deducting the costs associated with making and producing the product, or the costs of providing the service.

GPM (Gross Profit Margin) - The percentage of revenue is actual profit before adjusting for operating costs, such as marketing, overhead and salaries.

• Formula = Gross Profit / Revenue

Mark-up - The relationship between the selling price and cost price

Cost Price → Selling Price (finding selling price)

Cost price x (mark-up% + 100%)

Selling Price → Cost Price (finding cost price)

Sell price / (mark-up % + 100%)

GPM will change if the Mark-up changes, does not change due to quantity traded alone.

Stock turnover (STO) - average time for stock be sold in days

Formula:= Average stock x 365 days / Cost of goods sold