Merchandising Operations and Source Documents
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Questions and Answers

Which accounting method is recommended for high-priced goods in a merchandising operation?

  • Periodic Method
  • Hybrid Method
  • Perpetual Method (correct)
  • Combination Method

The Periodic Method requires a physical count of inventory at the end of the accounting period.

True (A)

What is the Cost of Goods Sold?

The carrying value of goods sold during a particular period.

The _________ Method is advisable for low-volume, low-priced goods.

<p>Periodic</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Cash Discounts = Reductions in the invoice price offered to encourage early payment Transportation Terms = Conditions under which ownership of goods is transferred during shipping Credit Terms = The agreement between the seller and buyer regarding payment schedules Inventory Management = The process of ordering, storing and using a company's inventory</p> Signup and view all the answers

What is the primary purpose of a trade discount?

<p>To encourage buyers to purchase products (A)</p> Signup and view all the answers

A cash discount requires a journal entry separate from the transaction recording.

<p>True (A)</p> Signup and view all the answers

What is the formula for calculating the invoice price after applying a trade discount?

<p>Invoice Price = List Price - Trade Discount</p> Signup and view all the answers

A transportation term refers to the arrangement of how inventory will be transported and who will shoulder the _____ and inventory while in transit.

<p>cost</p> Signup and view all the answers

Match the following types of discounts with their descriptions:

<p>Trade Discount = Given to encourage purchases without a need for special accounting entry Cash Discount = Encourages prompt payment and requires a journal entry Volume Discount = Offered for purchasing larger quantities Series Discount = Multiple discounts applied consecutively</p> Signup and view all the answers

If Pinnacle Technologies quotes a list price of P2,500 for a flash drive and offers a 20% trade discount, what would be the invoice price for one unit?

<p>P2,125 (C)</p> Signup and view all the answers

No entry is required for trade discounts when recording a purchase.

<p>True (A)</p> Signup and view all the answers

What discount is given to encourage customers to pay promptly?

<p>Cash Discount</p> Signup and view all the answers

What is the cash payment for an invoice of P150,000 with terms 2/10, n/30 if paid within the discount period?

<p>P148,500 (B)</p> Signup and view all the answers

The discount period for the terms 2/10, n/30 is 30 days.

<p>False (B)</p> Signup and view all the answers

What does 'n/30' indicate in credit terms?

<p>Net amount due in 30 days</p> Signup and view all the answers

For an invoice of P100,000 with terms 3/15, n/30, the cash payment on the 15th would be ______ if the discount is applied.

<p>P97,000</p> Signup and view all the answers

Match the terms with their corresponding amounts or actions:

<p>2/10, n/30 = Discount of 2% if paid within 10 days 3/15, n/30 = Discount of 3% if paid within 15 days 1/20, n/30 = Discount of 1% if paid within 20 days n/30 = Full payment due in 30 days</p> Signup and view all the answers

What will a buyer pay if they delay payment on an invoice of P200,000 with terms 2/10, n/30?

<p>P200,000 (C)</p> Signup and view all the answers

A trade discount is typically applied after calculating any cash discounts.

<p>True (A)</p> Signup and view all the answers

In journal entries for a seller, what is typically recorded at the time of sale?

<p>Inventory debit and Sales credit</p> Signup and view all the answers

Flashcards

Inventory Accounting Systems

Methods for tracking inventory in merchandising operations.

Perpetual System

Inventory system continuously updating inventory account.

Periodic System

Inventory system updating inventory only at period-end.

Cost of Goods Sold

Value of goods sold in a particular period.

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Perpetual Method (COGS)

COGS calculated constantly throughout accounting cycle.

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Trade Discount

Discount given to encourage buying, reducing list price; no separate accounting entry, invoice reflects discounted price.

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Invoice Price

Price after applying trade discounts to the list price; used for accounting.

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Volume Discount

Discount given for purchasing in bulk; can be part of a series.

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Series Discount

Multiple discounts applied in sequence; progressively reducing price.

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Cash Discount

Discount given for prompt payment; requires separate journal entry.

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Credit Terms

Agreement on payment terms that include trade discounts and cash discounts.

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List Price

Original, full price for a product or service; before discount application.

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Compute Invoice Price

Calculate the final price after applying all trade or volume discounts to the list price; crucial for accurate financial records.

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2/10, n/30 credit terms

A payment term offering a 2% discount if paid within 10 days; otherwise, the full amount is due within 30 days.

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Discount Period

The timeframe within which a buyer can take a discount on an invoice.

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Credit Term

Specifies the period allowed for payment of an invoice, usually after the invoice date.

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Cash Discount

A reduction in the price of goods or services if they're paid for early.

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Invoice

A document that shows the amount payable for goods or services.

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Trade Discount

A reduction from the list price offered by the seller.

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Invoice Payment

Settlement of payment according to invoice terms.

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Journal Entry (Accounting)

A record of financial transactions reflecting debit and credit balances.

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Study Notes

Merchandising Operations

  • Merchandising operations involve promoting goods and services for retail sale.
  • Accounting cycle: Accountants use this process to prepare financial statements for a specific time period.
  • Service operations: Involve selling expertise and time to consumers.

Source Documents

  • Purchase Requisition: A written request for goods to be purchased from suppliers.
  • Purchase Order: Authorization from the buyer for the seller to deliver merchandise.
  • Sales Invoice: Contains buyer information, quantity, description, price, amount of sales, and payment terms.
  • Bill of Lading: A document issued by the carrier specifying contractual conditions and terms of delivery.
  • Receiving Report: Records information about goods from a vendor and details quantities and description of delivered goods.
  • Statement of Account: A formal notice to a debtor detailing the account due.
  • Deposit Slip: A form signifying a cash deposit.
  • Check: A written order to the bank to pay a specified amount to a named person.
  • Official Receipt: Evidence of cash received by the seller.
  • Credit Memorandum: Used by the seller to notify the buyer that their account is decreasing.
  • Debit Memorandum: Used by the buyer to notify the seller that their account is decreasing.

Terms of Transactions

  • Credit Terms: Arrangement between buyer and seller outlining payment due dates, discounts, and interest/fees.
  • Trade Discount: A reduction in the price of goods, given to encourage purchases.
  • Cash Discount: An incentive for prompt payment received by customers.
  • Transportation Terms: Arrangements for transporting inventory, outlining who bears the cost.

Inventory Accounting Systems

  • Perpetual System: Continuously updated inventory records. Suitable for low-volume/high-priced goods.
  • Periodic System: Inventory records are updated at the end of accounting periods. Suitable for large-volume/low-priced goods.
  • Cost of Goods Sold (COGS): The carrying value of goods sold during a specific period.
  • Perpetual Method: COGS records are maintained throughout the accounting cycle. Periodic Method: COGS is calculated at the end of accounting periods.

Journal Entries (Perpetual vs. Periodic Systems)

  • Detailed journal entries for various transactions (purchases, sales, returns, discounts, etc.) are provided for both perpetual and periodic inventory systems in separate sections.

Example Transactions

  • Real-world examples of journalizing transactions, including purchase, return, sales, payment, and discount scenarios.

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Chapter 1 Merchandising Operation PDF

Description

This quiz covers key concepts in merchandising operations and the essential source documents used in retail transactions. Test your knowledge on accounting cycles, purchase requisitions, sales invoices, and more. Perfect for students studying retail management or accounting.

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