MGT 11A Chapter Notes - Chapter 4: Balance Sheet, Gross Profit, Gross Margin
Document Summary
Fob = (free on board) determines who pays transportation costs and other associated costs. Fob shipping point = ownership transfers when goods go to carrier = buyer pays tra(cid:374)sportatio(cid:374) (cid:272)osts (cid:894)(cid:373)er(cid:272)ha(cid:374)dise i(cid:374)ve(cid:374)tor(cid:455)(cid:272)ash (cid:895) Fob destination =ownership transfers when goods go to buyer = transportation costs paid (cid:271)(cid:455) seller (cid:894)(cid:894)d(cid:895)deliver(cid:455) e(cid:454)pe(cid:374)se (cid:894)c(cid:895)(cid:272)ash (cid:895) Delivery expense = transportation-out= freight out (all reported as selling expense in seller"s i(cid:374)(cid:272)o(cid:373)e state(cid:373)e(cid:374)t. Later purchase discounts, returns, allowances are credited (decreases) merchandise inventory. Each sales transaction for a seller has 2 parts: Revenue received in form of asset (from customer) Cost recognized for merchandise (sold to customer) Sales transaction accounting req. recording info about both parts. Each sales transaction, cash or credit, req 2 entries. If sale is for cash, debit to cash instead of accts receivable. Benefits seller by decreasing delay in receiving cash, and reduces future collection efforts. Sales discounts (contra revenue account) is deducted from sales acct when calculating net sales.
