The two forms of the balance sheet are Account form and Report form. The account form resembles the basic format of the accounting equation, with assets on the left side and the liabilities and owner’s equity sections on the right side. The report form shows the assets, liabilities, and owner’s equity in a downward sequence.
What are administrative expenses?
Administrative expenses are general expenses incurred in the administration of the business.
How do you find cost of Goods sold in the Periodic System?
We find cost of merchandise sold by subtracting the ending inventory from cost of merchandise available for sale.
What is a credit memorandum?
A credit memo is a form used by a seller to inform the buyer of the amount the seller proposes to credit to the account receivable due from the buyer.
What is a debit memorandum?
A debit memo is a form used by a buyer to inform the seller of the amount the buyer proposes to debit to the accounts payable due the seller.
Who pays for the transportation or freight cost under FOB destination?
The seller pays for the freight cost (debit Transportation out or delivery expense).
Who pays for the transportation or freight costs under FOB shipping point?
The buyer pays for the freight cost (debit Transportation In or Freight In).
How do you find gross profit?
We find gross profit by subtracting cost of merchandise sold from net sales.
How do you find income from operations?
We find Income from Operations by subtracting the Operating Expenses from Gross Profit.
What is inventory shrinkage?
The amount by which the merchandise for sale, as indicated by the balance of the merchandise inventory account, is larger than the total amount of merchandise counted during the physical inventory.
What is an invoice?
An invoice is a bill that the seller sends to the buyer.
What kind of account is merchandise inventory?
Merchandise Inventory is an asset account that shows the merchandise on hand (not sold) at the end of the accounting period.
What are the two forms of Income Statement?
The two forms of the income statement are: single-step income statement and multiple-step income statement.
What is the periodic method?
The periodic method is the inventory system in which the inventory records do not show the amount available for sale or sold during the period. When merchandise is purchase we debit the Purchases account rather than the Merchandise Inventory account.
What is the perpetual method?
The perpetual method is the inventory system in which each purchase and sale of merchandise is recorded in an inventory account.
What are Purchases Returns and Allowances?
From the buyer’s side, Purchase returns and allowances are the amount owed to the buyer for merchandise returned because of defects or damages.
What are Purchases Discounts?
Purchase discounts are the percentages taken by the buyer for early payment of an invoice.
What are Sales Discounts?
Sales discounts are cash discounts that the seller offers to their customers to give them an incentive to pay their invoices right away.
What are Sales Returns and Allowances?
Sales Returns and Allowances are given by the seller (to the buyer) because of damaged merchandise.
What are selling expenses?
Selling Expenses are expenses that are incurred directly in the selling of merchandise.
What are trade discounts?
Trade discounts are discounts from the list price in published catalogs or special discounts offered to certain classes of buyers.
What is Gross Profit Margin?
It is the percentage of each dollar remaining once the company has paid for the cost of the merchandise sold. The formula is:
GPM = Gross Profit / Net sales
What is Profit Margin?
The Profit Margin the percentage of earnings generated from revenue. It provides an idea of the firm’s pricing, cost structure, and efficiency.
PM = Net income / Net sales
Ch1 Accounting in Action
Ch2 Recording Process
Ch3 Adjusting the Accounts
Ch4 Completing the Accounting Cycle
Ch5 Merchandising Operations
Ch7 Accounting Information Systems
Ch8 Internal Control and Cash
Ch9 Accounting for Receivables
Ch10 PP&E, Natural Resources, and Intangible Assets
Ch11 Current Liabilities and Payroll
Ch14 Corporations:Dividends, RE
Ch15 Long Term Liabilities
Ch17 Statement of Cash Flows
Ch18 Financial Statement Analysis
Plato and Accounting
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