Exam 5 (Modules 10 & 11) Flashcards
provide an activity or perform a task for which they charge a fee
service businesses
purchases inventory and resells it to customers for a profit
merchandiser
sell goods to the public for use or consumption
retailers
purchase large quantities of products from a manufacturer and sell them to retailers
wholesaler
the goods that a merchandiser purchases for resale
inventory
deductions allowed by some sellers of goods to motivate customers to pay their bills within a specified time
cash discounts
indicate when payment is due for sales made on account
credit terms
free on board
FOB
FOB shipping point means
free on board to the seller, so the buyer must be paying for the shipping
FOB destination means
free on board to the buyer, so the seller must be paying for the shipping
updates accounting records each time a purchase or sale of inventory is made
perpetual inventory system
only updates the merchandise inventory records at the end of an accounting period
period inventory system
occurs when the owner of the goods places them with another person or company for the purpose of selling the goods to others
consignment
the owner of goods
the consignor
another person or company
the consignee
each inventory item that is sold can be matched with a specific purchase
specific identification method
FIFO stands for
first in first out
LIFO stands for
last in first out
AVCO stands for
average cost
assumes that the first goods that are purchased are the first goods that are sold (top down)
FIFO cost flow assumption
assumes that the last goods that are purchased are the first goods that are sold (bottom up)
LIFO cost flow assumption
requires us to compute the weighted average cost per unit of inventory each time a sale is made
AVCO cost flow assumption
occurs when there is a problem with merchandise that has been purchased or sold and it is not convenient or cost effective to return the merchandise
allowance
