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Q. Explain about Cost of goods sold?
Cost of goods sold is the main expense in merchandising companies. Note the cost of goods sold segment of the classified income statement in Exhibit 39. This section has previously discussed the items used in calculating cost of goods sold. Merchandisers habitually highlight the amount by which sales revenues exceed the cost of goods sold in the top part of the income statement. The surplus of net sales over cost of goods sold is the gross margin or gross profit. To express gross margin as a percentage rate we divide gross margin by net sales. In Exhibit 39 the gross margin rate is approximately 39.3 per cent (USD 103,000/USD 262,000). The gross margin rate indicates that out of every sales dollar approximately 39 cents is available to cover other expenses as well as produce income. Business owners watch the gross margin rate closely since a small percentage fluctuation is able to cause a large dollar change in net income. As well a downward trend in the gross margin rate may indicate a problem such as theft of merchandise. For example one Southeastern sporting goods company SportsTown Inc suffered noteworthy gross margin deterioration from increased shoplifting and employee theft.
Q. Explain about Purchase returns and allowances? Purchase returns and allowances A purchase return takes place when a buyer returns merchandise to a seller. When a buyer recei
Account titles and explanation column The first row of an entry shows the account debited. The second row shows the account credited. Notice that we notch the credit account t
Analyzing and using the financial results trend percentages It is occasionally more informative to express all the dollar amounts as a percentage of one of the amounts in the b
Q. Objectives of financial reporting? Financial reporting objectives are the broad overriding objectives sought by accountants engaging in financial reporting. According to the
Bank for International Settlements (BIS) A consortium bank recognized to coordinate the collection and rescheduling of German reparations after World War I, the BIS has surviv
Q. Illustrate Periodic inventory procedure? Companies by means of periodic inventory procedure make no entries to the Merchandise Inventory account nor do they maintain unit re
Flying High Inc. plans to raise $5,000,000 external financing through issuing bonds, and is considering two options: regular bonds and zero couple bonds. The regular bonds will ha
1.A business man strated business with 100million on the bank account obtained as a retirement package, 2.He used part of the money and bought a building worth 60 million, 3.He let
Q. Explain accrual basis of accounting? In certain circumstances companies may perhaps use the cash basis for income tax purposes. All through the text we use the accrual basis
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