accounting chapter 5

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service company

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Terms in this set (18)

service company

performs services as a primary source of revenue like barber, electrician, plumber attourney

merchandise company

sale of merchandise as primary source of revenue like cars, clothing, food, office supplies

perpetual

maintianes detailed records of purchases and sales. COGS is determined with each sale. companies still count inventory to measure shrinkage, verify that the system is working. called "cycle counts"

periodic

counting what you have from time to time. does not go according to GAAP because GAAP says we have to record sales when they are made.
-no detailed records
-cost of goods sold determined at end of he period b taking a physical count and pricing it

recording purchases of merchandise

purchase of merchandise is recorded when goods are received from seller [called purchases until the count is made and then moved to inventory in periodic]
recorded as inventory when purchased in perpetual.
-every purchase should be supported by business documents
-cash purchases have reciepts or cancelled checks
-credit purchases are supported by purchase invoices