Chapter 5 Flashcards

(12 cards)

1
Q

Merchandising Companies

A

Buy and sell goods rather than perform services as their primary source of revenue

the primary source of revenues is referred to as sales revenue or sales

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2
Q

Wholesaler

A

sell to retailers

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3
Q

Retailer

A

purchase and sell directly to consumers

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4
Q

perpetual system

A
  1. maintain detailed records of the cost of each inventory purchase and sale
  2. records continuously show inventory that should be on hand for every item
  3. company determines cost of goods sold each time a sale occurs
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5
Q

periodic system

A
  1. do not keep detailed records of the goods on hand

2. costs of goods sold determined by count at the end of the accounting period

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6
Q

advantage of the perpetual system

A
  1. traditionally used for merchandise with high unit values
  2. shows the quantity and cost of the inventory that should be on hand at any time
  3. provides better control over inventories than a periodic system
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7
Q

FOB shipping point

A
  1. ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller
  2. buyer pays freight costs
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8
Q

FOB Destination

A
  1. Ownership of the goods remains with the seller until the goods reach the buyer
  2. seller pays freight costs
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9
Q

purchase return

A

return goods for credit if the sale was made on credit, or for a cash refund if the purchase was for cash

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10
Q

purchase allowance

A

may choose to keep the merchandise if the seller will grant a reduction from the purchase price

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11
Q

credit terms

A

may permit buyer to claim a cash discount for prompt payment

example : 2/10, n/30

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12
Q

credit terms advantages

A
  1. purchaser saves money

2. seller shortens the operating cycle by converting the accounts receivable into cash earlier

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