WK 3 - FABM (TEMPORARY)

• Accounts on the Income Statement

  • Service Revenue
  • Sales Revenue
  • Operating Expenses
• Accounts on the Income Statement

  • SALES
  • COST OF GOODS SOLD
  • GROSS PROFIT
• 1/10, n/30


  • a buyer who pays within 10 days following the invoice date may deduct a discount of 1% of the invoice price. If payment is not made within the discount period, the entire invoice price is due 30 days from the invoice date.
• FOB shipping point

  Means "free on board at shipping point". The buyer incurs all transportation costs after the merchandise has been loaded on a railroad car or truck at the point of shipment.
• • means a buyer who pays by the 10th of the month following the month of purchase may deduct a 2% discount from the invoice price.
  • If payment is not made within the discount period, the entire invoice price is due 60 days from the invoice date.


  2/10/EOM, n/60
• means the entire invoice price is due 30 days from the invoice date without a discount 


  Net 30
• Examples of Merchandising Business

  Retail Clothing Grocery Stores Bookstores Hardware Stores
• primary product of merchandising business?

  merchandise items it sells
• merchandising business


  there's a presence of physical products which are being purchased and sold.
• refers to goods that are held for sale to customers in the normal course of business.

  merchandise/ merchandise inventory
• Income a company generates from providing a service


  service revenue
• Income a company generates from selling goods

  sales revenue
• expenditures that a business incurs to engage in activities not directly associated with the production of goods or services.

  operating expenses
• revenues collected from the sale of merchandise 


  SALES
• purchase price plus incidentals of merchandise available for resale 


  Cost of goods sold
• – Sales – Cost Of Goods Sold

  gross profit
• formula for service business?

  service revenue - operating expenses = net income
• formula for merchandising business

  sales revenue - cost of goods = gross profit - operating expenses = net income
• purchase goods that are ready for sale and then sell them to customers. 


  merchandising companies
• merchandising companies include:

  auto dealerships, clothing stores, and supermarkets, all of which earn revenue by selling goods to customers.
• the seller sells a product and transfers the legal ownership (title) of the goods to the buyer.

  merchandising sales transaction
• invoice (a sales invoice for the seller and a purchase invoice for the buyer) becomes the basis for recording the sale.


  business document
• invoice contains:

  details of a sale, such as the number of units sold, unit price, total price billed, terms of sale, and manner of shipment.
• document prepared by the seller of merchandise and sent to the buyer.

  invoice
• In some industries, credit terms include a cash discount of 1% to 3% to encourage early payment of an amount due. 


  payment terms
• tells you when an invoice is due and if a discount is offered for early payment. 


  payment terms