Merchandising Operations

Question 0

Wholesalers?

Answer 0

Buy finished products on from manufacturing firms in large quantities

Question 1

Purpose of Merchandising Firms?

Answer 1

Buy finished products, then resell to customers

Question 2

Retailers?

Answer 2

Typically buy from wholesale distributors & resell finished products to individual consumers
“Business-to-consumer transaction”

Question 3

Operating cycle

Answer 3

1. Purchase merch for resale 
        "inventory"
2. Sell merch  & deliver to customer
         "Accounts receivable"
3. Receive cash from customer towards accounts receivable
         "Cash"

Question 4

Sale on account

Answer 4

On account means on a credit basis

“Credit”

Question 5

COGS

Answer 5

Beginning inventory
+
COG purchased
= COG available for sale - Ending Inventory = COGS

Question 6

Two basic inventory systems

Answer 6

Perpetual “calculated electronically”

Periodic “physical count”

Question 7

FOB SHIPPING POINT

Answer 7

Buyer pays for shipping

Question 8

FOB DESTINATION

Answer 8

Seller is responsible for shipping cost

Question 9

Purchase R & A

“Returns & Allowances”

Answer 9

The purchaser returns merchandise to seller and receives a credit equal to the invoice price
Allowances- the seller reduces the amount that the purchaser owes for the shipment the buyer keeps in turn reducing the sale price

Question 10

Cost principle

Answer 10

An asset is initially recorded at the amount amount paid to acquire the asset

Question 11

Credit period

Answer 11

Max amount of time a purchaser can take to pay a seller

“n/30” 30 day credit period

Question 12

Cash/Sales discount

Answer 12

Amount seller deducts for early payment

“Quick pay incentive”

Question 13

Discount period

Answer 13

Time period discount is given in credit period:

1 / 10

Question 14

When do manufacturing firms and merchandising firms sales revenue?

Answer 14

When they sale products, regardless of whether the sale is on credit or for cash

Question 15

Revenue recognition principle

Answer 15

Revenue is recorded when goods are sold

Question 16

Matching principle

Expense recognition

Answer 16

Expenses should be recorded in the same accounting period as the revenues they help generate

Question 17

Accounting for Sales returns and allowances

Answer 17

Requires two journal entries:
Debit- sales R&A
Credit- Acc Rec

Debit- Inventory
Credit- COGS

Question 18

Sales discounts

Paid with in discount period

Answer 18

Ex:
Debit- Cash.
Debit- Sales discounts
Credit- Accounts receivables (which is the total of both cash and sales discounts)

Question 19

Net sales (for merchandising)

Answer 19

Gross sales revenue 
Subtract
(sales R&A)
Subtract 
(Sales discounts)
=net sales

Question 20

Bar codes

Answer 20

Merchandisers use bar codes w\ computerized inventory systems to use account for inventory…as it’s moved in and out of warehouse and trucks

Question 21

Gross profit or

Gross profit on sales

Answer 21

Difference between net sales and COGS and reveals the amount of sales revenue after subtracting the COGS

Question 22

Gross profit percentage

Answer 22

Rate at which a company earns gross on its sales revenue

Gross profit= gross profit on sales /
Net sales

Question 23

Return on sales ratio (profit margin)

Answer 23

Profit margin
(Return on = net income/net sales
Sales ratio)

Reveals the net income earned on each dollar of net sales

Question 24

Purchase discount | Gross method

Answer 24

The full amount of the purchase invoice (gross) is debited to merchandise inventory Later credited with cash discount if requirements are met

Question 25

Gross profit

Answer 25

Net sales - COGS