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Chapter 5

ACCT 2000 Chapter 5 Class Notes

13 pages110 viewsFall 2013

Department
Accounting
Course Code
ACCT 2000
Professor
All
Chapter
5

Page:
of 13
Accounting 2000
Chapter 5 Notes
1. Identify the differences between a service company and a merchandising
company.
2. Explain the recording of purchases under a perpetual inventory system.
3. Explain the recording of sales revenues under a perpetual inventory
system.
4. Distinguish between a single-step and a multiple-step income statement.
5. Determine cost of goods sold under a periodic system.
6. Explain the factors affecting profitability.
Merchandising Companies
Buy and sell goods
Primary source of revenue is ___________________________
Income Measurement
______ is the total
cost of goods sold
during the period
Accounting 2000
Chapter 5 Notes
Operating Cycles
Which generally takes more time?
Accounting 2000
Chapter 5 Notes
Flow of Costs
Companies use either a perpetual inventory system or a periodic inventory
system account for inventory.
What’s the difference?
Perpetual:
oMaintain detailed records of the cost of each inventory purchase and sale.
oRecords continuously show inventory that should be on hand.
oCompany determines cost of goods sold each time a sale occurs.
Periodic:
oDo not keep detailed records of the goods on hand.
oCost of goods sold determined by counting at the end of the accounting
period.

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