Chapter 5-7 Flashcards
Contra revenue
is a deduction from the gross revenue reported by a business, which results in net revenue. Contra revenue transactions are recorded in one or more contra revenue accounts, which usually have a debit balance (as opposed to the credit balance in the typical revenue account).Mar 5, 2013
Periodic Inventory System
s a system of inventory in which updates are made on a periodic basis. This differs from perpetual inventory systems, where updates are made as seen fit. In a periodic inventory system no effort is made to keep up-to-date records of either the inventory or the cost of goods sold.
What is the cost of goods sold?
The direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs.
perpetual inventory system
updates inventory accounts after each purchase or sale. Inventory subsidiary ledger is updated after each transaction. Inventory quantities are updated continuously. Periodic Inventory System. Periodic inventory system records inventory purchase or sale in “Purchases” account.
Gross Profit
updates inventory accounts after each purchase or sale. Inventory subsidiary ledger is updated after each transaction. Inventory quantities are updated continuously. Periodic Inventory System. Periodic inventory system records inventory purchase or sale in “Purchases” account.
profit margin
the amount by which revenue from sales exceeds costs in a business.
gross profit rate
A financial metric used to assess a firm’s financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold.
purchase discount
is an offer from the supplier to the purchaser, to reduce the sellinis made within a certain period of time. For example, a purchaser brought a $100 item, with a purchase discount term 3/10, net 30. If he pays within 10 days, he will only need to pay $97.
purchase return
A purchase return occurs when a buyer returns merchandise that it has purchased from a supplier.
sales discount
A sales discount is an incentive the seller offers in exchange for prompt payment on credit sales. Sales discounts are recorded in another centra‐revenue account, enabling management to monitor the effectiveness of the company’s discount policy.
sales invoice
An invoice, bill or tab is a commercial document issued by a seller to a buyer, relating to a sale transaction and indicating the products, quantities, and agreed prices for products or services the seller had provided the buyer. Payment terms are usually stated on the invoice.
sales returns and allowances
Sales returns occur when customers return defective, damaged, or otherwise undesirable products to the seller. Sales allowances occur when customers agree to keep such merchandise in return for a reduction in the selling price.
sales revenue
In business, revenue or turnover is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries and states, revenue is referred to as turnover.
average cost method
Under the ‘Average Cost Method’, it is assumed that the cost of inventory is based on the average cost of the goods available for sale during the period. The average cost is computed by dividing the total cost of goods available for sale by the total units available for sale.
first-in, first out (FIFO) method
The First-in, First-out Method (FIFO) FIFO Inventory Method. The first in, first out (FIFO) method of inventory valuation is a cost flow assumption that the first goods purchased are also the first goods sold.
last-in, first out (LIFO) method
The last in, first out (LIFO) method is used to place an accounting value on inventory. The LIFO method operates under the assumption that the last item of inventory purchased is the first one sold.
days in inventory
The calculation of the days’ sales in inventory is: the number of days in a year (365 or 360 days) divided by the inventory turnover ratio. For example, if a company had an inventory turnover ratio of 9, the company’s inventory turned over 9 times during the year.
inventory turnover
The calculation of the days’ sales in inventory is: the number of days in a year (365 or 360 days) divided by the inventory turnover ratio. For example, if a company had an inventory turnover ratio of 9, the company’s inventory turned over 9 times during the year.
cash
money in coins or notes, as distinct from checks, money orders, or credit.
fraud
wrongful or criminal deception intended to result in financial or personal gain.
internal auditors
nternal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations.
What is Sarbanes-oxley act
An act passed by U.S. Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations. The Sarbanes-Oxley Act (SOX) mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud.
what is Voucher system
A school voucher, also called an education voucher, with the system overall being called the voucher system, is a certificate of funding issued by the government, which the parents of a schoolchild have control of and are able to direct towards the public or private school of their own choosing to fully or partially …
cash equivalents
Cash equivalents are one of the three main asset classes, along with stocks and bonds. These securities have a low-risk, low-return profile. Cash equivalents include U.S. government Treasury bills, bank certificates of deposit, bankers’ acceptances, corporate commercial paper and other money market instruments.
