chapter 6 accounting

  1. operating cycle
    converting cash into inventory, sell it to turn it into an accounts recievalble, then colect on it to convert it into cash. The sooner the better. Th series of transactions through which a business generates its revenue and its cash reciepts from customers.
  2. 1. retailers
    2. wholesalers
    • 1. sells merchandise directly to public. ex: walmart, gap
    • 2. buy large quantities from manufacturers and resell them to retailers.
  3. merchandising company income statement
    • Sales
    • minus
    • Income
    • equals
    • gross profit
    • minus
    • Other Expenses
    • equals
    • Net Income
  4. Cost of Goods Sold
    an income statement expense account
  5. Gross Profit
    sales revenue - cost of goods sold
  6. perpetual inventory system
    tells you how much you have on hand, how much you have sold, and how much profit you have made. Automatic. May need to count once or twice at most 4 timesĀ a year. All transactions involving costs of merchendise are recorded as they occur. Purchases of merchendise are recorded by debiting an asset account called Inventory.
Card Set
chapter 6 accounting