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ACCT 2301 Ch5-9

Exam 2 Prep

QuestionAnswer
The inventory method in which inventory records do not show the amount available for sale during the period. Periodic Inventory Method
The inventory method in which each purchase and sale of merchandise is recorded in an inventory account. Perpetual Inventory Method
A detailed listing of merchandise for sale at the end of an accounting period. Physical Inventory
Revenue received for merchandise sold to customers less any sales returns and allowances and sales discounts. Net Sales Revenue
The amount of inventory recorded in the accounting records. Book Inventory
The account in the general ledger that summarizes the balances of accounts in a subsidiary ledger. Controlling Account
The cost that is recorded as an expense when merchandise is sold. Cost Of Goods Sold
The amount of time the buyer is allowed in which to pay seller. Credit Period
The terms for payment on account by the buyer to the seller. Credit Terms
Freight terms in which the seller pays the transportation costs from the shipping point to the destination. FOB Destination
Freight terms in which the buyer pays the transportation costs from the shipping point to the final destination. FOB Shipping Point
Sales revenue minus the cost of goods sold. Gross Profit
The excess of gross profit over total operation expenses. Income From Operations (or Operating Income)
Merchandise on hand (not sold) st the end of an accounting period. Merchandise Inventory
From the buyer's perspective, returned merchandise or an adjustment for defective merchandise. Purchase Return (or Purchase Allowance)
The total amount charged to customers for merchandise sold, including cash sales and sales on account. Sales Revenue
From the seller's perspective, discounts that the seller may offer the buyer for early payment. Sales Discount
From the seller's perspective, returned merchandise or an adjustment for defective merchandise. Sales Return (or Sales Allowance)
Expenses that incurred DIRECTLY in the selling of merchandise. Selling Expenses
Expenses incurred in the administration or general operations of the business. General & Administrative Expenses
A ledger containing individual accounts with a common characteristic. Subsidiary Ledger
Expenses that cannot be directly traced to operations. Other Expenses
Revenue from sources other than the primary operating activity. Other Income
What are the two methods for recording sales & purchase discounts? Gross Method and Net method
Which of the two methods for recording sales & purchase discounts IS MORE PRACTICAL than the other? Gross Method
List the conditions under which Revenue should be recognized: The selling company: has completed most of the activities necessary to produce & sell the goods, the costs associated can be reasonably measured, can objectively measure the amount of revenue earned, and reasonably sure of collection.
Interpret the following: 3/20, n/30 3% discount if paid within 20 days of the purchase/invoice date, otherwise the gross amount is due in 30 days
What is the difference between the two methods of recording sales discounts? net method - sale is recorded at net amount(gross-discount), & discounts not taken is adjusted after discount period; Gross Method- Sales are recorded at gross amount, & discounts are recorded ONLY if/when taken.
What are the two methods for recording purchases of inventory? Periodic & Perpetual
Freight term (when goods are in transit) for which the title passes to the buyer at the point of shipment FOB Shipping Point
Freight term (when goods are in transit) for which the title passes to the buyer when the goods reach the destination specified by the buyer. FOB Destination
Formula to calculate: Inventory Turnover (COGS)/(Average Inventory) =
Formula to calculate: Average Inventory (Beg Inventory + End Inventory)/2 =
Formula to calculate: Asset Turnover (Net Sales)/(Average Total Assets)=
Formula to calculate: Profit Margin on Sales (Net Income)/(Net Sales)=
Formula to calculate: Gross Profit Percentage (Gross Profit)/(Net Income)=
Ratio that measures the liquidity of inventory Inventory Turnover
Ratio that measure how efficiently assests are used to generate sales Asset Turnover
Ratio that measures net income generated by each dollar of sales Profit Margin of Sales
Ratio that measures the excess of sales over product costs Gross Profit Percentage
Formula to calculate: Net Sales Revenue Sales - Discounts - Returns/Allowances =
Created by: HBU-AST
 

 



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