Chapter 5 Terms Flashcards
Contra Revenue Account
An account that is offset against a revenue account on the income statement
Cost of Goods Sold
The total cost of merchandise sold during the period
FOB Destination
Freight terms indicating the the seller places the goods free on board to the buyer’s place of business, and the seller pays the freight
FOB Shipping Point
Freight terms indicating that the seller places the goods free on board the carrier, and the buyer pays the freight costs
Gross Profit
The excess of sales revenue over the cost of goods sold
Gross Profit Rate
Gross profit expressed as a percentage, calculated by dividing the amount of gross profit by net sales
Income from Operations
Income from a company’s principal operating activity, determined by subtracting costs of goods sold and operating expenses from net sales
Inventory
The asset that represents the merchandise that companies buy and sell to customers
Multiple-Step Income Statement
An income statement that shows several steps in determining net income
Net Sales
Sales and revenue less sales returns and allowances and sales discounts
Non-operating Activities
Various revenues, expenses, gains, and losses that are unrelated to a company’s main line of operations
Operating Expenses
Expenses incurred in the process of earning sales revenue
Other Expenses and Losses
A non-operating activities section of the income statement that shows expenses and losses unrelated to the company’s main line of operations
Other Revenues and Gains
A non-operating activities section of the income statement that shows revenues and gains unrelated to the company’s mainline of operations
Periodic Inventory System
An inventory system under which the company does not keep detailed inventory records in the inventory account throughout the accounting period but determines the costs of goods sold only at the end of an accounting period
Perpetual Inventory System
An inventory system under which the company keeps detailed records of the cost of each inventory purchase and sale in the inventory account, and the records continuously show the inventory that should be on hand
Purchase Allowance
A deduction made to the selling price of merchandise, granted by the seller so that the buyer will keep the merchandise
Purchase Discount
A cash discount claimed by a buyer for prompt payment of a balance due
Purchase Invoice
A document that supports each credit purchase
Purchase Return
A return of goods from the buyer to the seller for a cash or credit refund
Sales Discount
A reduction given by a seller for a prompt payment of a credit sale
Sales Invoice
A document that supports each credit sale
Sales and Returns and Allowances
Purchase returns and allowances from the seller’s perspective
Sales Revenue (Sales)
The primary source of revenue in a merchandising company
Single-Step Income Statement
An income statement that shows only one step in determining net income
