Depositor: A person or company that places money in a bank account. write-off: To charge an asset amount to expense or loss, in order to reduce the value of that asset and one's earnings. Allowance: A sum set aside for an occurrence that may or may not come to pass. For example, funds earmarked for expenses associated with potential bad weather. Corporation: The most common form of business organization, and one which is chartered by a state and given many legal rights as an entity separate
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business, and the accounting system used are also factors that must be used to make a determination between the periodic and the perpetual system. These two main systems are what is used for calculating cost of goods sold. The perpetual method is one that I am in favor of because it is a more up-to-date method. The use of current technology gives this system a clear advantage, and the cost for this technology is an expense worth taking. In the perpetual system, companies maintain detailed records
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“beginning inventory, and then add the cost of goods purchased minus the ending inventory equals cost of goods sold”.(Kimmel, P. D., Weygandt, J. J., & Kieso, D. E., 2011, p.287). The following Items makeup the cost of goods sold are the following items; labor expenses, cost of items on inventory and shipping cost or freight cost. There are two different types of systems used to calculate the cost of goods, and they are the Periodic System of inventory and there is the Perpetual System of inventory
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studying this chapter, you should be able to: •1 •2 •3 •4 •5 •6 •7 •8 •9 •10 Identify major classifications of inventory. Distinguish between perpetual and periodic inventory systems. Identify the effects of inventory errors on the financial statements. Understand the items to include as inventory cost. Describe and compare the cost flow assumptions used to account for inventories. Explain the significance and use of a LIFO reserve. Understand the effect of LIFO liquidations. Explain the dollar-value
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PROBLEMS: SET C Calculate ending inventory cost of goods sold for four inventory methods (LO 3) P6-1C Giles Manufacturing uses a periodic inventory system and has the following transactions for the month of June 2012: |Date |Transactions |Units |Cost per Unit |Total Cost | |June 1 |Beginning inventory |17 |$240 | |$ 4,080 | |June 7 |Sale
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Chapter 5—Inventory Merchandiser Makes a profit by buying and selling merchandise. A wholesaler is an intermediary that buys goods from manufacturers or other wholesalers and sells them to retailers or other wholesalers. A retailer buys goods from manufacturers or wholesalers and sells directly to consumers Operating cycle for Merchandisers Begins with the purchase of inventory and ends when cash is received from selling the inventory. Manufacturer Makes a profit by buying raw materials
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Perpetual Inventory System Inventory systems are used by organizations to calculate and maintain the cost of the inventory as well as purchase them based on reorder stock level. There are many forms of inventory systems, namely, Periodic, Perpetual, point order and many others. This document describes perpetual inventory system in detail. Perpetual Inventory system describes the process of monitoring and managing inventory where the sale of each product or goods is recorded as it is sold and inventory
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unit will introduce readers on the different activities done by a trading business. A brief discussion of the perpetual inventory systems is also included. Purpose The purpose of Unit I “Accounting for Merchandising Business ” is to illustrate the various buying and selling activities of a trading business. This unit also illustrates the basic entries using perpetual inventory system. A brief discussion of business documents are also included to give readers ideas of what are the basic papers
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cost of goods sold is the beginning Inventory plus Inventory Purchases minus End Inventory equals Cost of Goods Sold (Kimmel, 2011). An example of calculating cost of goods; Donna has a business that sells dolls on eBay. The inventory count at the beginning of January shows that she has $500 worth of inventory on hand. Over the month, she purchases another $2,000 worth of dolls. Her inventory count at the end of January shows that she has $500 of inventory on hand. When using this equation,
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6/11/02 12:30 PM Page 345 mac62 mac62:1253_GE: Accounting for Inventories Inventories in the Crystal Ball Policy makers, economists, and investors all want to know where the economy is headed. For example, if the economy is headed for a slow-down, it might be prudent on the part of the Federal Reserve to cut interest rates or for Congress to consider a tax cut to head off an economic downturn. Information on inventories is a key input into various decision makers’ economic prediction models
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