Income statement - Merchandise Business
Gross Sales Less: Return Discount =Net Sales Less: COGS =Gross Profit Less: Operating Expense =Net Income
F.O.B Destination
Sellers pays the freight costs from the shipping point to the buyer’s final destination.
Seller ->DR Delivery Expense
Income Statement - selling expense
F.O.B Shipping Point
Buyer pays the freight cost from the shipping point to the final destination
Buyer -> Added to cost of inventory = DR Inventory
Allocation of Cost (How to determine COGS)
3 methods
- Average
- FIFO
- LIFO
Set Up Reserve Account
2 methods
- % of Credit Sales
2. A/R Aging Report
Depreciation (of long term fixed asset)
3 methods
Given Cost, life, Residual Value, Depreciation Cost 1. Unit of production 2. Straight line 3. Double Declining (2x Straight line )
Chart of Accounts - Merchandise Business
Assets : Inventory
Revenue: Sales, Sales Returns (Credit memo), Sales Discount (Contra acct to sales)
Cost and Expenses: COGS, Delivery Expense
Credit Memo
Seller
Sales Returns
AR-xxx company
Inventory
COGS
Debit Memo
Informs the seller of the amount the buyer proposes to debit to AP due the seller. States the reasons for return
AP
Inventory