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Accounting Midterm Review
Terms in this set (16)
Gross Profit =
Gross Profit- Operating Expenses
Net Realizable Value=
Accounts Receivable Bal. - Balance for Doubtful Accounts
Inventory Turnover Ratio=
COMS / Average Inventory
(starting Balance+ending balance/2)
Control of Inventory primary objective
Safeguard inventory and report inventory in financial statements
Perpetual Inventory System
A detailed inventory system in which a company maintains the cost of each inventory item, and the records continuously show the inventory that should be on hand.
Periodic Inventory System
An inventory system in which a company does not maintain detailed records of goods on hand throughout the period and determines the cost of goods sold only at the end of an accounting period.
Perpetual Inventory System Journal Entry
Periodic Inventory System Journal Entry
Average Daily cost of goods sold=
Number of days in sales inventory means?
Length of time it takes to acquire, sell and replace inventory
Inventory Turnover ratio shows?
Relationship between cost of goods sold and amount of inventory carried during a period.
The higher the number the better.
Allowance Method for Uncollectible Accounts
1. Companies estimate uncollectible accounts receivable.
2. Debit Bad Debts Expense and credit Allowance for Doubtful Accounts (a contra-asset account).
3. Companies debit Allowance for Doubtful Accounts and credit Accounts Receivable at the time the specific account is written off as uncollectible.
Money claims against other entities
Days' Sales in Inventory
365/inventory turnover ratio
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