Flashcards in Chapter Four Power Point Deck (15)
Accounting for Inventory equation
-Cost of goods sold
Inventory is a(n) ____.
Continually updates accounting records for merchandising transactions
-"every time we do a transactions, we have to update our books"
Updates only at the end of a period
--Not covered in ACC 121
-"Only going to update our inventory at the ends of each period. This was used before scanners and inventory systems"
-Selling to a wholesaler or retailer
-Discounts offered for frequent or large purchases
-Record the purchase at the net price
"A percent that two companies agree upon for being frequent customers."
----Fin getting deals from Joor such as 20% off due to them being reoccurring purchasers
Inventory is expensed (cost of goods sold) when:
-Lost, stolen or destroyed
-Identified as obsolete or worthless
The only accounts allowed for the purchasing side of the company are:
When a retailer buys products at a discounted price, will the true cost principal cause the price to be what the item purchased is bought for with a discount, or without?
With the discount
-2% discount if paid in 10 days, full amount is due in 30 days
-Never count the day of purchase as the first day. Start counting days 24 hours after the purchase.
-announced as "two-ten, n-thirty"
-Discount to purchasers account that encourages early payment
-Inventory recorded at net cost after payable is satisfied
Purchase (Inventory) Return
-Debit memorandum from purchaser
-Reduce inventory at cost
-Reduce accounts payable at cost
--Trade and purchase discounts (if used) must be incorporated in the net cost of the inventory return
Inventory goes down when...
Inventory goes up when...
Inventory houses the cost until...
Inventory is sold