ACCOUNTG 221 Lecture Notes - Lecture 8: Gross Margin, Income Statement

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Accounting chapter 4: lecture #8 & lecture #9. The goods purchased for resale are called merchandise inventory. Is important to know so you can make a profit. Inventory goes on the books for what it cost us. The amount recorded for inventory should include: Invoice price, freight charges, inspection cost, and preparation cost. Inventory consist of products acquired for resale to customers, It is often the largest current asset on the balance sheet (what is the largest non-current usually) Is a tangible property that is held for resale or will be used in producing goods or services. Allocating of inventory cost between asset and expense accounts: Gross margin is a good indication of how profitable a company is at the most fundamental level. Companies with higher gross margins will have more money left over to spend on there business operations, such as research and development or marketing. Most commonly used in merchandising/ manufacturing companies and not service.

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