University:
University of Minnesota Duluth
Course:
ACCT 2001 | Principles of Financial Accounting
Academic year:

2023
Views:

414

Pages:

1
Author:

Ruby Ibarra

Credit terms Are the payment terms of purchase or sale as stated on the invoice Most credit terms express the discount, the discount time period, and the final due date. Example “3/15, n/30” means a 3% discount is paid within 15 days, otherwise the full amount is due in 30 days. Under credit terms of “3/15, net 30 days” if smart touch learning pays on june 15th, which is within the discount period, the company will receive a discount on the balance owed of 28,000 Purchase agreements specify shipping terms to determine when title of the goods transfers to the purchaser and who pays the freight Fob shipping point Means the buyer takes ownership to the goods after the goods leave the seller's place of business The buyer usually pays the freight. Fob destination Means the buyer takes ownership to the goods at the delivery destination point The seller usually pays the freight When merchandisers are required to pay for shipping costs: Freight in Is the transportation cost to ship goods into the purchasers warehouse: this it is freight on purchased goods. Freight out Is the transportation cost to ship goods out of the seller's warehouse and to the customer: thus it is freight on goods sold to a customer Knowing the net cost of inventory allows a business to determine the actual cost of the merchandise purchased Net cost of inventory is calculated as follows: Net cost inventory purchased= purchased cost of inventory-purchase returns and allowances - purchase discount + freight in

Principles of Financial Accounting Chapter 5 Lecture Notes

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