Chapter 5 Flashcards
a business that sells merchandise, or goods, to customers.
merchandiser
buys goods from a manufacturer and sells them to retailers
wholesaler
buys merchandise from manufacturers or a wholesaler and then sells the goods to consumers.
retailer
gross profit
Net Sales Revenue - Cost of Goods Sold
which are expenses other than Cost of Goods Sold.
operating expenses
requires a physical count of inventory to determine inventory on hand.
periodic inventory system
keeps a running computerized record of merchandise inventory
perpetual inventory stystem
the seller’s request for payment from the purchaser.
invoice
the payment terms of purchase or sale as stated on the invoice.
credit terms
means the buyer takes ownership (title) to the goods after the goods leave the seller’s place of business (shipping point).
FOB shipping point
The buyer (owner of the goods while in transit) usually pays the freight.
means the buyer takes ownership (title) to the goods at the delivery destination point.
FOB destination
The seller (owner of the goods while in transit) usually pays the freight.
____ is the transportation cost to ship goods into the purchaser’s warehouse; thus, it is freight on purchased goods.
freight in
____ is the transportation cost to ship goods out of the seller’s warehouse and to the customer; thus, it is freight on goods sold to a customer.
freight out
___ is an asset account used to estimate the cost of merchandise inventory a company will receive in returns.
estimated returns inventoy
____ is a liability account used to estimate the amount of refunds that will be paid to customers in the future
refunds payable
____ occurs when the seller reduces the amount owed by a customer, but the customer does not return of merchandise inventory
sales allowance
___ is loss of inventory occurring from theft, damage, and errors.
inventory shrinkage
____ groups all revenues together and then lists and deducts all expenses together without calculating any subtotals.
single step income statement
___contains subtotals to highlight significant relationships.
multi step income statement
In addition to net income, it reports gross profit and operating income.
how to find operating income:
gross profit - operating expenses
___ measures the profitability of each sales dollar above the cost of goods sold.
gross profit percentage
gross profit percentage formula:
gross profit percentage = gross profit / net sales revenue
