Accounting: Chapter 6: Vocab Flashcards
account form
The form of balance sheet that resembles the basic format of the accounting equation, with assets on the left side and Liabilities and Owner’s Equity sections on the right side.
administrative expenses (general expenses)
Expenses incurred in the administration or general operations of the business.
cost of merchandise purchased
The cost of net purchases plus transportation costs.
cost of merchandise sold
The cost that is reported as an expense when merchandise is sold.
credit memorandum (credit memo)
A form used by a seller to inform the buyer of the amount the seller proposes to credit to the account receivable due from the buyer.
credit period
The amount of time the buyer is allowed in which to pay the seller.
credit terms
Terms for payment on account by the buyer to the seller.
debit memorandum (debit memo
A form used by a buyer to inform the seller of the amount the buyer proposes to debit to the account payable due the seller.
FOB (free on board) destination
Freight terms in which the seller pays the transportation costs from the shipping point to the final destination.
FOB (free on board) shipping point
Freight terms in which the buyer pays the transportation costs from the shipping point to the final destination.
freight in
Costs of transportation.
gross profit
Sales minus the cost of merchandise sold.
income from operations (operating income)
Revenues less operating expenses and service department charges for a profit or an investment center.
inventory shrinkage (inventory shortage)
The amount by which the merchandise for sale, as indicated by the balance of the merchandise inventory account, is larger than the total amount of merchandise counted during the physical inventory.
invoice
The bill that the seller sends to the buyer.
merchandise available for sale
The cost of merchandise available for sale to customers calculated by adding the beginning merchandise inventory to net purchases.
merchandise inventory
Merchandise on hand (not sold) at the end of an accounting period.
multiple-step income statement
A form of income statement that contains several sections, subsections, and subtotals.
net purchases
Determined when purchases returns and allowances and the purchases discounts are deducted from the total purchases.
net sales
Revenue received for merchandise sold to customers less any sales returns and allowances and sales discounts.
other expense
Expenses that cannot be traced directly to operations.
other income
Revenue from sources other than the primary operating activity of a business.
periodic inventory system
The inventory system in which the inventory records do not show the amount available for sale or sold during the period.
perpetual inventory system
The inventory system in which each purchase and sale of merchandise is recorded in an inventory account.
purchase return or allowance
From the buyer’s perspective, returned merchandise or an adjustment for defective merchandise.
purchases discounts
Discounts taken by the buyer for early payment of an invoice.
report form
The form of balance sheet with the Liabilities and Owner’s Equity sections presented below the Assets section.
sales
The total amount charged customers for merchandise sold, including cash sales and sales on account.
sales discounts
From the seller’s perspective, discounts that a seller may offer the buyer for early payment.
sales returns and allowances
From the seller’s perspective, returned merchandise or an adjustment for defective merchandise.
selling expenses
Expenses that are incurred directly in the selling of merchandise.
single-step income statement
A form of income statement in which the total of all expenses is deducted from the total of all revenues.
trade discounts
Discounts from the list prices in published catalogs or special discounts offered to certain classes of buyers.
