Explain about gross margin method, Accounting Basics

Assignment Help:

Q. Explain about Gross margin method?

The steps in computing ending inventory under the gross margin method are

- Estimate gross margin based on net sales using the similar gross margin rate experienced in prior accounting periods.

- Determine approximate cost of goods sold by deducting estimated gross margin from net sales.

- Determine approximate ending inventory by deducting estimated cost of goods sold from cost of goods available for sale.
Therefore the gross margin method estimates ending inventory by deducting estimated cost of goods sold from cost of goods available for sale.

The gross margin method presumes that a fairly stable relationship exists between gross margin and net sales. In other words gross margin has been a reasonably constant percentage of net sales and this relationship has continued into the current period. If this percentage relationship has changed the gross margin method doesn't yield satisfactory results.


Related Discussions:- Explain about gross margin method

Describe exceptions to the realization principle, Q. Describe Exceptions to...

Q. Describe Exceptions to the realization principle? Exceptions to the realization principle: The following illustrations are instances when practical considerations may cause

In addition, In addition, assume that Anheuser-Busch InBev sold 200 million...

In addition, assume that Anheuser-Busch InBev sold 200 million barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 40% of selling,

Show recording changes in dividends, Q. Show Recording changes in dividends...

Q. Show Recording changes in dividends? Recording changes in dividends ever since dividends decrease retained earnings increases appear on the left side of the Dividends accoun

Bank reconciliation statement, even after preparing BRS why does balance as...

even after preparing BRS why does balance as per cash book and balance as per pass book do not tally?

What is perpetual inventory records, Q. What is Perpetual inventory records...

Q. What is Perpetual inventory records? Perpetual inventory records Even though companies could apply perpetual inventory procedure by hand tracking units and dollars in and ou

Present value, Present value -- a notion that compares the value of money a...

Present value -- a notion that compares the value of money available in the future with thevalue of money in hand today. For instance $78.35 invested today in a 5% savings accountw

What do you mean by net sales, Q. What do you mean by Net sales? We dem...

Q. What do you mean by Net sales? We demonstrate a condensed income statement to emphasize its major divisions. Next, we explain the more complete income statement actually pre

Functions of balance sheet, The basic functions of a balance sheet are: ...

The basic functions of a balance sheet are: 1. It provides the financial place of a company on any given date 2. It provides the liquidity picture of the concern. 3. It p

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd