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Lecture 5

ACC 100 Lecture 5: Chapter 5

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Ryerson University
ACC 100
Beavis Alison

Chapter 5 Inventory 1. Current asset 1. owned/future benefit 2. When sold, moves from asset to “Cost of Goods Sold” Selling price 1. SP = cost + (cost x markup %) 2. Gross profit margin: the difference, in dollars, between the selling price and the cost that the retailer paid to buy the inventory 1. GPM = SP - cost Gross profit margin ratio 1. (GPM/sales revenue x 100) Sales discounts 1. Contra-revenue account → decreases revenue Product costs 1. All the costs incurred to purchase inventory 2. Could include shipping, etc. Period costs 1. Costs that a business incurs in the normal course of the business that are not product costs 2. Ex. rent, advertising, salaries Perpetual inventory system 1. Records every purchase and sale 2. Computerized Credit terms 1. Agreement between the business and the supplier with regards to when invoices have to be paid 2. Goes through accounts payable Credit discounts 1. 2/10, n/30 1. 2 = percentage discount 2. 10 = # of days to get t
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