Chapter 5 Flashcards

1
Q

cash discount

A

A reduction in invoice price offered to customers to encourage prompt payment of invoices.

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2
Q

cost of goods sold

A

The total cost attributed to units of inventory actually sold during a period.

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3
Q

credit memorandum

A

A seller-prepared document evidencing an approved return of merchandise for credit against an account.

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4
Q

debit memorandum

A

A purchaser-prepared document evidencing a return of merchandise to a seller.

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5
Q

F.O.B. destination

A

Free on Board destination; meaning the transfer of ownership of inventory will occur when the goods reach their destination and the seller will incur the freight charges.

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6
Q

F.O.B. shipping point

A

Free on Board shipping point; meaning the transfer of ownership of inventory will occur when the goods are shipped and the purchaser will incur the freight charges.

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7
Q

goods available for sale

A

A callculated amount corresponding to the beginning inventory plus net purchases; represents the total pool of inventory available during a period from which sales can occur.

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8
Q

gross method

A

A method of recording purchases of inventory at invoice price.

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9
Q

gross profit

A

A calculated amount corresponding to net sales minus cost of goods sold.

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10
Q

inventory

A

Goods held for resale to others.

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11
Q

invoice price

A

List price less any trade discounts.

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12
Q

list price

A

An established price determined by reference to a catalog or general price list; before any discounts.

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13
Q

multiple-step income statement

A

A complex income statement with sections that segregate cost of goods sold calculations and other components of income and expense; enables enhanced evaluations of data.

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14
Q

net method

A

A method of recording purchases of inventory at invoice price less available cash discounts.

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15
Q

operating expenses

A

General expense category for selling and administrative costs.

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16
Q

periodic inventory system

A

An inventory system that utilizes a Purchases account and does not update inventory with each sale; inventory is updated by physical count at the end of accounting periods.

17
Q

perpetual inventory system

A

A “real-time” inventory system that updates inventory records with each purchase and sale.

18
Q

purchase discounts

A

A cash discount available on purchases of merchandise on account; encourages prompt payment.

19
Q

sales discounts

A

A cash discount offered to customers to encourage prompt payment of invoices.

20
Q

single-step income statement

A

A simple income statement with a section for all revenues and another for all expenses; there is no direct association between specific revenue and expense components.

21
Q

trade discount

A

A reduction from list price that is not entered in the accounting records; customarily offered in “setting” the invoice amount.