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WCC acct 201 test 2
accounting ratios, real balances, and formulas to remember.
Question Answer
Assets increase, debit or credit debit
Assets decrease, debit or credit credit
liabilities increase, debit or credit credit
liabilites decrease, debit or credit debit
withdrawals increase, debit or credit debit
expenses decrease, debit or credit debit
revenues increase, debit or credit credit
periodic HIGH volume, LOW cost (e.g. target)
perpetual LOW volume, HIGH cost (e.g. car dealership)
PURCHASES acct. periodic or perpetual? periodic
MERCHANDISE INV acct. periodic or perpetual? perpetual
COST OF GOODS SOLD acct. periodic or perpetual? perpetual
return on equity (ratio) net income / average owner's equity ... (RETURN means NET INCOME numerator)
profit margin (ratio) net income / net sales
asset turnover (ratio) net sales / average total assets
return on assets (RATIO) net income / average total assets ... (RETURN means NET INCOME numerator)
goods available for sale COGAFS (formula) begin inv + net cost of purchases
net cost of purchases (formula) net purchases + freight in
net purchases (formula) total purchases - purchase returns/allowances
cost of goods sold COGS (formula) begin inv + (purch's - r/a + freight in) - end inv
working capital (formula) current assets - current liabilities
gross margin (formula) net sales - cost of goods sold
net sales (formula) gross sales - r/a
net income (formula) gross margin - total operating expenses
periodic volume vs cost HIGH volume, LOW cost (e.g. target)
perpetual volume vs cost LOW volume, HIGH cost (e.g. car dealership)
PURCHASES acct. periodic or perpetual? periodic
MERCHANDISE INV acct. periodic or perpetual? perpetual
COST OF GOODS SOLD acct. periodic or perpetual? perpetual