Chapter 5 Flashcards
Merchandise
Products (goods) a company buys to resell
Wholesaler
Buys products from manufacturers and sells them to retailers
Retailer
Buys products from wholesalers and sells them to consumers
Cost of Goods Sold
The expense of buying and preparing merchandise
= starting inventory + purchases - inventory
Gross Profit (Gross Margin)
Net sales minus cost of goods sold
= total revenue - cost of goods sold
Merchandise Inventory
refers to products that a company owns and intends to sell
Perpetual Inventory System
records cost of goods sold at the time of each sale
Periodic Inventory System
Records cost of goods sold at the end of the period
Credit Terms
Include the amounts and timing of payments from a buyer to a seller
Credit Period
The amount of time allowed before full payment is due
Gross Profit
Net Sales minus Cost of Goods Sold
Acid Test Ratio
Gross Margin Ratio
Net Income (Calculation)
= Sales - cost of goods sold - expenses
