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

Concepts of accounting, the consequences of non-compliance of each of the a...

the consequences of non-compliance of each of the accounting concepts.

Vouchers, what is the exact meaning of journal that we doing entries??

what is the exact meaning of journal that we doing entries??

How to enter this transaction in books of accounts?, My company has done a ...

My company has done a down payment on inventory ,then manufacturer will ship this order between 30 to 60 days after original payment and the balance is due 60 days once the order g

A physical inventory on december 31 shows 2, a physical inventory on decemb...

a physical inventory on december 31 shows 2,000 units on hand. holliday sells the units for $12 each. the company has an effective tax rate of 20%. holliday uses the periodic inv

What is trial balance, Q. What is trial balance? The firm credits two A...

Q. What is trial balance? The firm credits two Accounts Payable and accounts Cash in this one entry. But the dollar totals of the debits and credits are equal. Cyclically accou

Introduction to Accounting, Hi Team, I want to get an accounting assignmen...

Hi Team, I want to get an accounting assignment to be done according to NZ university standards. It''s from basic accounting (introduction to accounting). Need to be done by 10th

Define purchase discounts and purchase returns, Q. Define purchase discount...

Q. Define purchase discounts and purchase returns? Two general deductions from purchases are (a) purchase discounts and (b) purchase returns and allowances. In the general ledg

ACCOUNTING CONCEPT, What is the implication of applying accounting concepts...

What is the implication of applying accounting concepts wrongly?

FNSACC501 – Provide financial and business performance infor, Part 1: Stude...

Part 1: Students should consult with appropriate personnel in order to undertake an assessment of the client’s financial needs. Students must undertake an interview / consultation

Standards and conventions of accounting, Investigate the principles, standa...

Investigate the principles, standards and conventions of accounting by:   assessing  the need for financial information, its purpose and limitations   analysing the role

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