Who do retailers sell to?
Consumers
Who do wholesalers sell to?
Retailers
What is revenue?
Revenue from sales of merchandise, referred to as sales.
What are the two categories of expenses?
Cost of goods sold, operating expenses.
What is gross profit?
Sales - cost of goods sold.
What is gross profit - operating expenses?
Income before tax.
What is flow of costs?
Beginning inventory + cost of goods purchased during period = cost of goods available for sale.
What happens once goods are sold?
Cost are assigned to cost of goods sold.
What are the two systems used to account for inventory and cost of goods sold?
Perpetual, periodic
What is the perpetual inventory system?
Detailed records are kept for cost of each product purchased and sold.
What is the periodic inventory system?
Cost of goods sold only determined at end of accounting period.
What is included in purchases of merchandise (inventory account)?
Freight, less (purchase returns, allowances, discounts), Total of all costs is called cost of goods purchased.
What does FOB (Free on Board) refer to?
Where title or ownership of goods transfers
What are the two different FOB?
Destination, shipping point.
Who pays for each FOB?
Destination - supplier, shipping point - customer
What are purchase returns?
Purchaser returns goods to seller
What is an allowance?
Supplier gives discount if customer keeps.
What happens in both purchase returns and allowances?
Decreases cost of goods purchases
What is a purchase discount?
When a supplier gives a discount if the customer pays quickly
What is an adjusting entry
Inventory counts
What are the two record of sales?
Record sales revenue, one to record cost of merchandise sold.
