COMMERCE 1AA3 Chapter Notes - Chapter 6: Variety Store, Gross Margin, Gross Profit
4 Dec 2016
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Chapter 6 : inventory and cost of goods sold. Sales revenue includes the mark-up price of the merchandise, is based on the sale price. Cost of goods sold is based on the cost of inventory that is sold. Inventory shifts from asset to expense when the seller delivers goods to buyer. Gross profit/gross margin - excess of sales revenue after deducting cost of goods sold. Free on board ( fob ) shipping point - should be included in the books of buyer, as soon as it leaves the shipper"s dock. Fob destination - inventory should be included in books of seller until delivered to buyer. Uses a computer software to keep a running total of inventory on hand. Inventory is counted at least once a year. Used by businesses that sell inexpensive goods ( e. g dollar store) Has purchase account, freight in account, purchase returns and allowances account, Inventory purchases are recorded in the purchases account purchase allowance account.
