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52 Cards in this Set
- Front
- Back
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Define merchandiser |
A merchandiser earns net income by buying and selling merchandise. |
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Define wholesaler |
A wholesaler buys products from manufacturers and sells them to retailers. |
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Define retailer. |
A retailer buys products from manufacturers or wholesalers and sells them to consumers. |
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What is the formula for net income for a merchandiser? |
Revenues from selling merchandise - minus - the cost of merchandise sold to customers - minus - other expenses for the period |
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What is the usual accounting term for revenues from selling merchandise? |
Sales |
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What is the term used for the expense of buying and preparing the merchandise? |
Cost of goods sold |
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What is gross profit (aka gross margin)? |
Net sales - minus - costs of goods sold |
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What is a merchandise inventory? |
Refers to products that the company owns and intends to sell. |
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What is the typical operating cycle for department stores? |
2-5 months |
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What is the typical operating cycle for grocery merchants? |
2-8 weeks |
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What are the two ways companies account for inventory? |
Perpetual inventory system and periodic inventory system. |
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What is a perpetual inventory system? |
Method that maintains continuous records of the cost of inventory available and the costs of goods sold. It updates accounting records for EACH purchase and sale of inventory. It |
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What is a periodic inventory system? |
Method that records the cost of inventory purchases but does not continuously track the quantity available or sold to the customers; records are updated at the end of each period to reflect the physical count and costs of goods available.
It updated the accounting records for purchases and sales of inventory only at the end of a period |
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How would Z-mart record a purchase without cash discounts? |
Assets = liabilities + equity. Merchandise inventory - cash. |
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What is a list price? |
Catalog (full) price of an item before any trade discount is deducted. |
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What is a trade discount? |
Reduction from a list or catalog price that can vary for wholesalers, retailers, and consumers |
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What are credit terms? |
The amounts and timing of payments from a buyer to a seller in the future. |
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What would “n/10 EOM stand for? |
Net 10 days after end of month |
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What does EOM mean? |
End of month ; used to describe credit terms for credit transactions. |
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What does “n/30” stand for? |
Net 30 days; sellers require payment within 30 days after the invoice date. |
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Define credit period. |
Time period that can pass before a customers payment is due. |
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What is a cash discount? |
Reduction in the price of merchandise granted by a seller to a buyer when payments is made within the discount period. |
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What is a purchases discount? |
Terms used by a purchaser to describe a cash discount granted to the purchaser for paying within the discount period.
A buyer views a cash discount as a purchase discount. |
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Define sales discount. |
Terms used by seller to describe a cash discount granted to buyers who pay within the discount period.
A seller views a cash discount as a sales discount |
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What is a discount period? |
The period in which a cash discount is available and the buyer can make a reduced payment. |
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What does “2/10, n/60” mean? |
Full payment is due within a 60 day credit period, but the buyer can deduct 2% if payment is made within ten days of the invoice date. |
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What does the amount recorded for merchandise inventory include? |
Purchase cost, shipping fees, taxes, and any other costs necessary to make it ready for sale. |
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What is a purchase allowance? |
Refers to a seller granting a price reduction to a buyer of defective or unacceptable merchandise. |
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What is the point of transfer called? |
FOB (Free on board) |
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What is FOB? |
Free on board. The point when ownership of goods passes to the buyer; means the buyer pays shipping costs and accepts ownership of goods when the seller transfers goods to the carrieR |
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What does FOB destination mean? |
Free on board destination. Means the seller pays shipping costs and the buyer accepts ownership of the goods at the buyers place of business. |
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I’m FOB destination, when does e seller record revenue from the sale? |
When the goods arrive at the destination because the transaction is not complete before that point. |
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What happens when returns are received by the seller? |
The seller debits Sales Returns and Allowances, a contra revenue account to Sales. |
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What happens when merchandise is returned to the seller and is not defective and can be resold to another customer? |
The seller returns these goods to inventory’s |
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What happens when returned goods are defective? |
The returns inventory is recorded at its estimated value. |
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What are the three steps of the accounting process for a merchandiser? |
Adjustments, statement preparations, and closing. |
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Define shrinking |
The loss of inventory and it is computed by a physical count of inventory with expenses amounts. |
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How is the income statement or a merchandiser different from a service company? |
A merchandiser income statement differs because it includes cost of goods and gross profits. |
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What is net sales for a merchandiser affected by? |
Discounts, returns, and allowances and some additional expenses such as delivery expense and loss from defective merchandisez |
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How does the balance sheet differ for merchandisers? |
It includes merchandise inventory as part of current assets. |
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What are examples of temporary accounts that are unique to merchandisers? |
Sales of goods, sales discounts, sales returns and allowances, and costs of goods sold. |
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T/F. Sales is a revenue account and is reported on the income statement. |
True. |
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What are the steps of a merchandiser’s multi-step income statement? |
1. Net sales 2. Cost of goods sold 3. Gross profit 4. Expenses 5. Net income |
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What type of an account is a sales revenue account? |
A contra-revenue account |
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T/F: merchandise inventory is an asset reported on the balance sheet and contains the cost of products purchased for sale. |
True |
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What are the four closing journal entries at the end of an accounting cycle for a merchandiser? |
Close revenue accounts. Close the dividends account. Close the income summary account. Close expense accounts. |
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How is a sales discount increased? |
With a debit |
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How do you calculate goods available for sale? |
Beginning inventory + plus + net purchases |
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How do you calculate goods available for sale? |
Goods available for sale - minus - ending inventory. |
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How do you calculate gross profit? |
Net sales. Minus - cost of goods sold |
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How to determine net income for merchandiser? |
Gross profit - minus - expenses |
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How to calculate net income for a service company? |
Revenues - minus - expenses |
