FUNDAMENTALS OF ACCOUNTING II REVIEWER
the published list price offered to sellers to large
NATURE OF ACCOUNTING FOR
MERCHANDISING BUSINESS
GROSS PROFIT= Sales- Cost of Goods Sold
NET INCOME=Gross profit-generating expense
MERCHANDISE- goods, such as books clothing,
groceries, or appliances, bought for resale
MERCHANDISE INVENTORY- items of
merchandise the business has in stock or on
hand available for sale
NET INCOME= fees earned or service income-
operating expenses
ACCOUNTING FOR PURCHASES
PURCHASE- refers to merchandise acquired for
resale. These are the goods a business buys for
the sale pupose of selling them to the
customers
PURCHASE REQUISITION- is a written request
that a certain items be ordered.
- They are generally Pre-numbered
consecutively to prevent misuse or loss.
PURCHASE INVOICE- is a document that the
seller sends to the buyer that lists the terms and
the quality, description, unit price, value added
tax and total cost of the items.
PURCHASE DISCOUNT- is a discount taken by
the buyer for early payment of a purchase made
on credit.
DISCOUNT PERIOD- is the period of time within
which an invoice must be paid if the discount is
to be taken
TRADE DISCOUNT- is a special discount from
buyers.
PURCHASE INVOICE TERMS
CASH / COD- this means that payment is
required at the same time the merchandised is
delivered
2/10, n/30- this means 2% discount of the gross
invoice price is allowed if payment is made
within 10 days after the invoice date, and the
gross price Is due to 30 days from the invoice
date
STOCKS AND BONDS
STOCK MARKET INDEX- is a measure of a
portion of the stock market
e.g; PSE composite index
-can be a standard by which investors can
compare the performance of their stocks.
BALANCE SHEET AND STATEMENT OF CASH
FLOWS
1. Reports Assets, Liabilities and equity at
a specific date.
2. Provides information about resources,
obligations to creditors, and equity in
net resources
3. Helps in predicting amounts, timing and
uncertainty of future cash flows
USEFULNESS OF THE BALANCE SHEET
Computing rates of return
Evaluating the capital structure
Assess risk and future cash flows
Analyze the companys
-Liquidity FREIGHT COLLECT- The buyer deducted the
price of transportation to seller
-Solvency
FREIGHT PREPAID- The seller will add the
-Financial Flexibility price to buyer
LIMITATIONS OF THE BALANCE SHEET BAD ORDER
PURCHASE RETURN AND ALLOWANCES
Most assets and Liabilities are reported and
historical cost DEBIT MEMORANDUM- Notify the creditor
Use of judgements and estimates (BUYER)

Many items of financial value are CREDIT MEMORANDUM- Value parted with
committed (Buyer will received) notify the seller.

CASH AND OTHER ASSETS A COMPANY

EXPECTS TO
-Convert into cash
-Sell or consume

Either in one year or in the operating cycle

whichever is longer.

ASSETS

NON-CURRENT ASSETS (Long Term

Investments)

1. Securities (Bonds, common stock, long

term notes)
2. Tangible fixed assets not currently used
in operations (land held speculation)
3. Special Funds (sinking fund, pension
fund, or plant expansion fund)
4. Non- consolidated subsidiaries

TRANSPORTATION IN :

FOB Destination- the seller will paid the

transportation

FOB Shipping Point- the buyer will pay the

transportation