Accounting 201: Chapter 5
QUESTIONS 100% ANSWERED!!
Merchandising Company - ANSWERbuy and sell merchandise
Sales Revenue (Sales) - ANSWERprimary source of revenues for the companies
sale of merchandise
Cost of Goods Sold - ANSWEREXPENSE account that represents the cost of all the
inventory they sell during the period.
Operating expense - ANSWERall the cost to run or operate the business
Operating Cycle - ANSWER- operating cycle of a merchandising company ordinary
is LONGER than that of a Service Company
- merchandising starts with ash and having to buy there product, then selling, and
then recording
- service doesn't have a bunch of steps
Inventory System - ANSWER-how we track or account for our inventory
- They have 2 types
Perpetual Inventory System - ANSWER- constantly updates both inventory & cost of
goods sold on accounts
1) every time there is a sale, they will book revenue
2) Adjusting inventory (decrease/increase) & book cost of good sold
*has more record keeping within the company
Periodic Inventory System - ANSWER- not going to update inventory or cost of
goods sold. (tracks sales , and buying)
- end of period is when you have to find everything and figure out the total
Freight Cost - ANSWER- freight cost is incurred by the seller of an Operating
expense.
- 2 terms of freight cost: (FOB- free on board)
*New Account: Freight-Out (delivery expense)
FOB Shipping Point - ANSWERWhen the buyer pays freight cost. So the seller
doesn't pay (free)
FOB Destination - ANSWERWhen the seller pays for freight cost. So the buyer
doesn't pay (free)
Purchases of Return and Allowance - ANSWERpurchaser may be dissatisfied
because goods are damaged, defective, of inferior quality, or do not meet
expectations
*They have the same journal entries
QUESTIONS 100% ANSWERED!!
Merchandising Company - ANSWERbuy and sell merchandise
Sales Revenue (Sales) - ANSWERprimary source of revenues for the companies
sale of merchandise
Cost of Goods Sold - ANSWEREXPENSE account that represents the cost of all the
inventory they sell during the period.
Operating expense - ANSWERall the cost to run or operate the business
Operating Cycle - ANSWER- operating cycle of a merchandising company ordinary
is LONGER than that of a Service Company
- merchandising starts with ash and having to buy there product, then selling, and
then recording
- service doesn't have a bunch of steps
Inventory System - ANSWER-how we track or account for our inventory
- They have 2 types
Perpetual Inventory System - ANSWER- constantly updates both inventory & cost of
goods sold on accounts
1) every time there is a sale, they will book revenue
2) Adjusting inventory (decrease/increase) & book cost of good sold
*has more record keeping within the company
Periodic Inventory System - ANSWER- not going to update inventory or cost of
goods sold. (tracks sales , and buying)
- end of period is when you have to find everything and figure out the total
Freight Cost - ANSWER- freight cost is incurred by the seller of an Operating
expense.
- 2 terms of freight cost: (FOB- free on board)
*New Account: Freight-Out (delivery expense)
FOB Shipping Point - ANSWERWhen the buyer pays freight cost. So the seller
doesn't pay (free)
FOB Destination - ANSWERWhen the seller pays for freight cost. So the buyer
doesn't pay (free)
Purchases of Return and Allowance - ANSWERpurchaser may be dissatisfied
because goods are damaged, defective, of inferior quality, or do not meet
expectations
*They have the same journal entries
