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Chapter 7, 8, 8
Int. Financial
| Term | Definition |
|---|---|
| Bank Balance | Add: DIT, Undeposited receipts (cash on hand), Bank errors that understate the bank statement balance Deduct: Outstanding checks, Bank errors that overstate bank balance |
| Book Balance | Add: Bank credits and collections not recorded, Book errors that understate book balance Deduct: Bank charges no yet recorded, Book errors that overstate book balance |
| Petty Cash | Transfer of funds to Petty Cash: Debit Petty Cash and credit Cash |
| Perpetual Inventory System | Continuously tracks changes in Inventory |
| Periodic Inventory System | Physical count at year end |
| COGS (Periodic method) | BI + Purchases - Purchase Returns & Allowances - Purchase Discounts + Transportation In = COGA for sale - EI = COGS |
| Purchase of Inventory (Perpetual) | Debit Inventory; Credit A/P |
| Purchase of Inventory (Periodic) | Debit Purchases; Credit A/P |
| Return of PUR (Perpetual) | DR A/P; CR Inventory |
| Return of PUR (Periodic) | DR A/P; CR Purchase Returns & Allowances (Contra account to PURs) |
| Payment for PURs w/ cash discounts (Perpetual) | DR A/P; CR Cash, Inventory |
| Payment for PURs w/ cash discounts (Periodic) | DR A/P; CR Cash, Purchase Discounts |
| FOB Shipping point | Buyer's at time of delivery to common carrier |
| Consigned Goods | Seller's inventory, not buyer's |
| Sales w/ buybacks | Seller's inventory, not buyer's |
| Sales on installments | Buyer's if you can estimate collectability |
| Effect of Inventory Errors (EI understated) | If EI understated > RE understated, Working Capital understated, Current Ratio understated, COGS overstated, Net Income understated |
| Effect of Inventory Errors (EI overstated) | Current year: Total Assets overstated, COGS understated, Net Income overstated, RE overstated; Following year (if perfect count): TA No effect, COGS over, NI Under, RE No effect |
| Effect of Inventory Errors (Purchase & EI understated) | Inventory under, RE no effect, A/P under, Working Capital no effect, Current Ratio over, PURs under, COGS no effect, Net Income no effect, EI under |
| FOB destination | exclude from inventory if not received by year end |
| Product Costs | Attach to Inventory; Costs directly connected with bringing the goods to the buyer's place of business and converting such goods to a salable condition. Includes freight charges on goods purchased. |
| Conventional Method Ratio | (Cost BI + Cost PUR) / (Retail BI + PUR M ups) |
| Conventional Method EI | EI @ retail x Ratio |
| LIFO Method Ratio (If EI > BI) | (Cost PURs) / (Retail PUR + M up - M dwn) |
| LIFO Method EI (If EI > BI) | BI @ LIFO Cost + (added layer @ retail x ratio) |
| LIFO Method Ratio (If EI < BI) | Cost BI / Retail BI |
| LIFO Method EI (If EI < BI) | EI @ retail x Ratio |
| Gross Profit Method - Estimated COGS | Sales x % of COGS |
| % of Markup Cost | GP % sales / (100% - GP % sales) |
| % of Sales (to convert % of Cost) | % of Cost / (100% + % of Cost) |
Created by:
ronniemad
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