A company must perform strictly proper accounting only for items that are significant to the business’s financial situation according to the materiality concept requirements.

A whole seller buts merchandising inventory from a
producer and then sells them to retailers.

Cash (net) realizable value shows the credit sales price adjusted for returns, discounts, and allowances expected to be collected from customers.

Value-Added Tax is not in inventory cost flow.

Perpetual Inventory System is a system of tracking and recording inventory and costs of goods sold on a continual basis, so current inventory balance can be calculated on real time basis, and the accounting system can display the current inventory balance at any point in time.

Days’ Sales in Inventory ratio measures the number days that inventory is held by a company.

There are three main accounting issues with respect to the accounting of receivables. They are:

1. Recognition of accounts receivable
2. Valuation of accounts receivable
3. Disposition of accounts receivable

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

The Victor Company debited the cash account 1.600 TL and the sales revenue account credited 1.600 TL. 

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

When COGS is deducted from sales revenue, gross profit is calculated. Gross profit evaluates the company’s profitability in terms of selling activities.

Income statement is the financial statement that reports operation results of a business for a specific period of time (month, quarter quarter, or year year).

Trade discount is the reduction in the catalogue price or listed price of the goods. Trade discounts reduce the final sales price and are not affected by the date of payment. Hence, it is important to note that trade discounts are not recorded and therefore they are not reflected in the books of accounting for both buyer and seller. Only the price is recorded after a net of the trade discounts.

The framework that suggested by COSO is useful for board of directors, management, all personnel, and all other related parties. However, this internal control framework has a particular importance and benefit for board of directors and management. Below are explained some important points which are beneficial for board of directors and management. COSO framework:

• can be applied to all types of business.

• has a principle-based approach and this approach can provide flexibility to the internal control process.

• states how components and related principles are present and functioning and how components operate together. So, they can understand the requirements for effective controls.

• facilitates risk assessment prepares an appropriate response within acceptable level and deals with fraud.

• can be applied not only in financial reporting but also all other types of reporting, operating and compliance objectives.

• can help to eliminate ineffective, redundant, or inefficient controls.

The correct answer is B.

Documentation, which is related to the accounting process, provides the details about financial transactions in a business. These include sales invoice, purchase orders, shipping records, reports, etc. For each transaction, separate and adequate documents should be prepared as hard copy or in an electronic format. Documents should be pre-numbered to assure the completeness of the transaction and to prevent control deficiencies. The correct answer is E.

Operating cycle begins with the purchase of merchandise inventory and ends when the
cash from sales is collected from customers. The correct choice is A.

Factoring is the business of purchasing receivables from companies upon a fee for the services performed to manage and collect receivables.

Gross profit = Net sales revenue – Cost of goods sold

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

The correct answer is B. The operating cycle of a merchandising company starts with the purchase of inventories from a producer or an individual, called a vendor.