Chapter 5 Flashcards
Merchandise company
Buys and sells goods
COGS
the expense occurred in purchasing product that you will sell
Another name for gros profit
Gross margin
Headings on IS for merchandising company
Sales Less: Sales discounts and sales returns and allowances Net sales Less COGS Gross profit Less expenses Net income/loss
Entry when buying/selling merch
- Merch Inventory débit; cash or accounts payable credit
2. cogs débit; cash or accounts receivable credit
Purchase allowance
-defect in merch, price reduced
Débit cash or accounts payable; merch INV. Credit
Purchase return
Merch returned
-debit cash or accounts payable; credit mi
Purchase discounts
- entry changes only when paid (this is when you get discount)
- merch inv credit (discount amount); credit cash (amount paid); accounts payable credit (before discount price)
1/15 n45
Must pay in 45 days
But if you pay in 15 days, 1% off
Trade discount
Normal entry, but trade discount calculation n’éludes in notes
Sales returns and allowances
- sales returns and allowance debit; cash or acc rec credit
- if returned to inventory: merch inv débit; cogs credit
Sales discount
Acc receivable credit (before discount price)
Cash debit (after discount price)
Sale discount debit
Entry for shrinkage
Cogs débit; Merch inv crédit
To account for shrinkage
Classified multi-step income statement
Sales Less: sales discounts Less: sales allowances and returns Net sales Cost of goods sold Gross profit from sales Operating expenses Selling expenses General and administrative expenses Income from operations Other revenue and expenses Income before tax Income tax expense Net income/loss
Special merch accounts you need to lose in closing entries
Sales
Sales returns and allowances
Sales discounts
Cogs
