Consider the impact of recording these transactions. What key profit factor do you learn from this journal entry?
With cash and accounts receivable you can find out the total current assets. It is important that these records are kept and accurate to determine the financial health of the company.
How a firm records this data shows how they define cash and cash equivalents. The assets are highly liquid and can be transformed into cash in 3 months or less.
With COGS you can see the net profit and it also shows you how much your goods cost to produce and how much you are making off the goods. Under Armour usesa FIFO method for the inventory you can also see how the company records this as an asset (prepaid expense).
You can get a quick snapshot of how profitable the company isyou can also calculate gross profit ratio and inventory turnover based on these numbers.
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