Terms

Question 1

Inventory

Answer 1

the merchandisers total cost of acquiring goods that has not yet sold

Question 2

sales revenue

Answer 2

total selling price of all goods that the merchandiser did sell to customers

Question 3

cost of goods sold

Answer 3

total cost of all goods that the merchandiser did sell to customers (what you paid to buy inventory items)

Question 4

Gross profit equation

Answer 4

sales revenue - cost of goods sold = gross profit

Question 5

Cost of goods sold equation

Answer 5

BI+P-EI=CGS

Question 6

Ending inventory equation

Answer 6

BI+P-CGS=EI

Question 7

periodic inventory

Answer 7

updates the inventory records for merchandise purchases, sales and returns only at the end of the accounting period

Question 8

perpetual inventory

Answer 8

the inventory records are updated “perpetually,” every time inventory is bought, sold, or returned (updating their inventory records every time something gets scanned)

Question 9

FOB shipping point

Answer 9

the sale is recorded when the goods leave the seller’s shipping department

Question 10

FOB destination

Answer 10

the sale is recorded when the goods reach their destination (the customer) (you want to be the FOB destination)

Question 11

Debit

Answer 11

Cash

Question 12

Credit

Answer 12

Sales revenue/ inventory

Question 13

Expense accounts go up w

Answer 13

Debit

Question 14

Expense accounts go down w

Answer 14

Credit

Question 15

FIFO

Answer 15

first in first out

Question 16

LIFO

Answer 16

Last in first out

Question 17

Weighted average

Answer 17

COGAS/# of Units Available for Sale

Question 18

LCM

Answer 18

when the value of inventory falls below its recorded cost, the amount recorded for inventory is written down to its lower market value

Question 19

Inventory turnover

Answer 19

Beginning Inventory + Ending Inventory / 2

Question 20

Pros and cons of extending credit

Answer 20

advantage: increases the seller’s revenues
disadvantages: increased wage costs, bad debt costs, delayed receipt of cash

Question 21

Estimate bad debt expense

Answer 21

Then put on the income statement

Question 22

Allowance for doubtful accounts

Answer 22

Asset/ credit

Question 23

Bad debt expense

Answer 23

stockholders’ equity, debit

Question 24

Accruing equation

Answer 24

Principal (P) X Interest Rate (R) X Time (T) in months (12) = Interest (I)

Question 25

inventory converts to _______, goods are recorded _____________

Answer 25

INVENTORY WILL BE USED OR CONVERTED INTO CASH WITHIN ONE YEAR, IT IS REPORTED ON THE BALANCE SHEET AS A CURRENT ASSET. GOODS ARE INITIALLY RECORDED IN INVENTORY AT COST, WHICH IS THE AMOUNT PAID TO ACQUIRE THE ASSET AND PREPARE IT FOR SALE.

Question 26

Notes receivable

Answer 26

promises that require other parties to pay the business according to written agreements.

Question 27

Accounts receivable

Answer 27

arise from the sale of goods or services on credit

Question 28

Direct write off method

Answer 28

records bad debt expense only when accounts are written off; not allowed under GAAP

Question 29

Fraud triangle

Answer 29

Rationalization Opportunity Incentive

Question 30

Gross profit equation

Answer 30

Revenues - expenses (Sales) - (COGS)

Question 31

Segregation of duties

Answer 31

not be responsible for all arts of their job , cashier needs to get managers approval to check the money. so they don’t make mistakes

Question 32

Establish responsibility

Answer 32

Assign each task to one employee

Question 33

Independently verify

Answer 33

Check others work

Question 34

Restrict access

Answer 34

Don’t provide access to assets or information unless needed for info

Question 35

Document procedures

Answer 35

Prepare documents to show activities that occurred

Question 36

Comparative financial statement

Answer 36

Gauge how a company does over time

Question 37

Consistent financial statements

Answer 37

Follow same accounting principals

Question 38

Consolidated financial statements

Answer 38

A group of entities that are presented as being those of a single entity