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FSU - ACG 2021 - Fin. Acct. Notes - Week 6 - Class Notes

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FSU - ACG 2021 - Fin. Acct. Notes - Week 6 - Class Notes

School: Florida State University
Department: Accounting
Course: Financial Accounting
Professor: Ronald Pierno
Term: Summer 2015
Tags: financial accounting
Name: Fin. Acct. Notes - Week 6
Description: these notes go over chapter 5
Uploaded: 02/19/2018
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background image Tabana 1 ACG2021 – Chapter 5: Merchandising Operations and the Multiple-Step Income Statement 1. Identify the differences between a service company  and a merchandising company. a. Merchandising Operations a. The primary source of revenues is referred to as sales revenue or sales. b. Income Measurement a. c. Operating Cycles a. The operating cycle of a merchandising company ordinarily is longer  than that of a service company. d. Flow of Costs a. Companies use either a perpetual inventory system or a periodic  inventory system to account for inventory. b. Periodic System i. Do not keep detailed records of the goods on hand.  ii. Cost of goods sold determined by count at the end of the  accounting period.  c. Perpetual System i. Maintain detailed records of the cost of each inventory purchase  and sale.  ii. Records continuously show inventory that should be on hand for  every item. iii. Company determines cost of goods sold each time a sale occurs. d. Advantages of the Perpetual System i. Shows the quantity and cost of the inventory that should be on  hand at any time. ii. Provides better control over inventories than a periodic system. iii. Traditionally used for merchandise with high unit values.
background image Tabana 2 2. Explain the recording of purchases under a perpetual inventory system. a. Recording Purchases of Merchandise  a. Made using cash or credit (on account).
b. Normally record when goods are received from the seller.
c. Purchase invoice should support each credit purchase.
d. Freight Costs – Terms of Sale
i. e. Purchase Returns and Allowances  i. Purchaser may be dissatisfied because goods are damaged or  defective, of inferior quality, or do not meet specifications. ii. Purchase Return 1. Return goods for credit if the sale was made on credit, or  for a cash refund if the purchase was for cash iii. Purchase Allowance 1. May choose to keep the merchandise if the seller will  grant a reduction of the purchase price f. Purchase Discounts i. Credit terms may permit buyer to claim a cash discount for  prompt payment.  ii. Advantages: 1. Purchaser saves money.
2. Seller shortens the operating cycle by converting the 
accounts receivable into cash earlier. iii. Terms: 3. Explain the recording of sales revenues under a  perpetual inventory system. a. Recording Sales of Merchandise

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School: Florida State University
Department: Accounting
Course: Financial Accounting
Professor: Ronald Pierno
Term: Summer 2015
Tags: financial accounting
Name: Fin. Acct. Notes - Week 6
Description: these notes go over chapter 5
Uploaded: 02/19/2018
4 Pages 35 Views 28 Unlocks
  • Better Grades Guarantee
  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
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