MUHASEBE I

In manufacturing companies raw materials are converted to finished goods and then sold to customers. These companies have three types of inventories: (i) raw materials inventory, which includes materials and parts purchased to be used in production, (ii) work-in-process inventory, which are the products that are not completed as of the end of accounting period and (iii) finished goods inventory, which are the completed products available to be sold.

The cyle starts with the purchase of inventories from a producer or an individual, called a vendor.

The correct answer to question is option A. In a perpetual inventory system, balance of inventory accounts is always updated as each transaction occurs.

When this merchandise inventory is sold, the revenue is reported as sales revenue, and its cost is recognized as an expense called the cost of merchandise sold.

COGS = Beginning Inventory + Purchases – Ending Inventory

=10,000+5,000 -1,000 =14,000

If two parties agree on the shipment as FOB shipping point, transportation is the buyer’s responsibility. It is also called “Freight-in”, because freight cost is included in the cost of purchased goods.

If the shipment type is FOB destination, transportation is under the seller’s responsibility. Freight cost is not included in the cost of goods; therefore, this type of shipment is called “freight out”. The freight cost is recognized as delivery expense, in the accounting records of the seller.

Merchandise Inventory account is credited 150 TL.(3 X 50)

50 X 500= 25,000TL X %3 =>750 TL discount

Retailer companies are not among the service companies

Merchandise on hand (not sold) is called merchandise inventory asset.

During the operating cycle, companies generate revenues which is called the “Sales Revenue” and this item is recorded on the top of income statement to be the basis for net income.

Income before tax is the last line of the income statement.

Cost of Goods Sold = Beginning Inventory + Purchases – Ending Inventory

Net Cost of Inventory Purchased = Purchase cost inventory – Purchase returns and allowances – Purchase discounts + Freight in

If customers are unsatisfied with the goods they purchased, because of defects or for other reasons, seller may reduce the initial price at which the goods were sold to pursue the customers to keep the goods. It is sales allowance.

Net sales revenue = Sales Revenue – (Sales Returns and Allowances + Sales Discounts)

Gross profit = Net sales revenue – Cost of goods sold

In the closing process at first all revenues and expenses are closed to a pool account, called “income summary”.