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Chapter 5

GMS 200 Chapter Notes - Chapter 5: Perpetual Inventory, Accounts Payable, Financial Statement


Department
Global Management Studies
Course Code
GMS 200
Professor
Louis Pike
Chapter
5

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Chapter 5: Merchandising Companies:
NEW/REVIEW ACCOUNTS: COMPLETE BEFORE LECTURE
Using your textbook determine the definition, category, and the financial statement on
which the following accounts appear:
Acct Name Definition Category On which
statement?
Accounts
Receivable
Inventory
Accounts
Payable
Sales
Sales
returns and
allowances
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Acct
Name
Definition Category On which
statement?
Sales
discounts
Cost of
goods sold
Freight
Out
Perpetual vs. Periodic Inventory Systems:
Perpetual Periodic
Record purchase of
inventory
at time of purchase at time of purchase
Record sale of inventory Sales and cost of goods sold
recorded at point of sale
Sales recorded at point of
sales. Cost of goods sold
recorded at the end of the
period
Inventory count completed Annually Annually
Reason for inventory count To check accuracy of
perpetual records AND to
determine shrinkage (due to
theft, damage, human error,
etc)
To calculate inventory on
hand and use this
information to determine
what the cost of goods sold
number is. This method is
very similar to Supplies
learned in Chapter 4 (count
supplies at end of year and
expense the difference).
Perpetual Inventory System:
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We will be using the perpetual inventory system ONLY.
BUYER OF INVENTORY:
PW Audio Supply, Inc., has an opening inventory balance of $11,200.
On August 4th PW Audio Supply, Inc., purchases $5,500 of inventory for cash.
Date Assets = Liabilities + Shareholders’ Equity
On August 8th PW Audio Supply, Inc., purchases an addition $2,300 of inventory on
account, terms 2/10, n/30. The inventory was shipped FOB shipping point.
Date Assets = Liabilities + Shareholders’ Equity
What does FOB shipping point mean? Who is responsible for paying the shipping costs?
What does FOB destination mean? Who is responsible for paying the shipping costs?
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