Vocab. Chapter 5 & 6

Question 1

credit terms

Answer 1

Payment arrangements determined by the seller as to when invoices are due and whether early payment discount is offered.

Question 2

FOB destination

Answer 2

Shipping terms where the ownership of merchandise passes to the buyer when the buyer receives the merchandise.

Question 3

FOB shipping point

Answer 3

Shipping terms where the ownership of merchandise passes to the buyer when the seller delivers the merchandise to the freight carrier.

Question 4

Periodic inventory system

Answer 4

Inventory system that updates the inventory account only at the end of the accounting period based on a physical count of inventory on hand.

Question 5

perpetual inventory system

Answer 5

Inventory system that updates the inventory account for every purchase and sale transaction.

Question 6

Inventory shrinkage

Answer 6

Losses of inventory due to theft, damage, spoilage, etc. that cause the actual inventory on hand to be less than that on record.

Question 7

Single-step income statement

Answer 7

statement where net income is determined by deducting all expenses from all revenues.

Question 8

Multiple-step income statement

Answer 8

Statement that includes subtotals for sales, gross profit, and income from operations in determining net income.