Imma Biddness Man
What type of company sells time or services instead of products?
Service company
What does “2/10, n/30” mean?
2% discount if paid within 10 days; net due in 30 days
If Z-Mart sells $1,000 of goods (cost $300), what is the gross profit?
$700
What is “shrinkage”?
Loss of inventory from theft, damage, or errors
For FOB shipping point, who owns the goods in transit?
Buyer
What type of company buys and sells goods to earn revenue?
Merchandising company
What is the term for a price reduction to the buyer for defective merchandise?
Purchase allowance
Why might a company offer a sales discount?
To encourage early payment and improve cash flow
A company buys $1,000 in goods, returns $200, and pays within a 2% discount period. How much is paid?
$784
Beginning inventory plus net purchases is
Merchandise Available for Sale
What is the formula for Gross Profit?
Sales – Cost of Goods Sold
If Z-Mart buys $500 of merchandise on account with 2/10, n/30, how much do they pay if they pay within 10 days?
$490
Is the term used for the expense of buying and preparing merchandise for sale.
COGS
Depreciation expense, office salaries expense, insurance expense, and rent expense are types of these expenses on an income statement.
General and Administrative expenses
A buyer pays on account $1,000, minus the 2% discount, what is the transaction?
Debit Cash = $980
Debit Sales Discount = $20
Credit AR = $1,000
What are the two main types of inventory systems?
Perpetual and Periodic
Under which shipping term does the buyer pay for shipping?
FOB shipping point
Z-Mart completes a $1,000 credit sale with terms of 2/10, n/45.
What is the transaction for the sold goods?
Debit AR - $1,000
Credit Sales - $1,000
What is the adjusting entry for inventory shrinkage?
Debit Cost of Goods Sold
Credit Merchandise Inventory
The expenses of advertising merchandise, making sales, and delivering goods to customers are known as:
Selling Expenses
What account records the cost of products sold to customers?
Cost of Goods Sold
What account records the cost of transporting merchandise purchased?
Merchandise Inventory
Z-Mart completes a $1,000 credit sale with terms of 2/10, n/45.
What is the transaction for the merchandise sold?
Debit COGS = $300
Credit Merch Inv = $300
Name 3 of the accounts that are closed to Income Summary in merchandising?
Sales, Sales Returns & Allowances, Sales Discounts, Cost of Goods Sold, and Expenses
A company’s gross margin ratio is 40%. What does this mean?
40¢ of each sales dollar is available for expenses and profit