W03 vocab Flashcards
Cash discount
Provides a discount on the final price after purchase if a retailer pays within a discount window. Typically stated in days
Cost of goods sold (COGS)
Expense account that houses all costs associated with getting a product ready for sale
Gross margin
Amount available after deducting cost of goods sold from net sales to cover operating expenses and profit
Gross sales
Original amount of the sale without factoring in reductions for sales discounts, returns, or allowances
Merchandising company
Resells finished goods produced by a manufacturer (supplier) to customers
Net income
When revenues and gains are greater than expenses and losses
Operating cycle
Amount of time it takes a company to use its cash to provide a product or service and collect payment from the customer
Operating expenses
Daily operational costs not associated with the direct selling of products or services
Perpetual inventory system
System that automatically updates and records the inventory account every time a sale or purchase of inventory occurs
Physical inventory count
Manual stock check of inventory to make sure what is recorded on the books matches what is actually in the warehouse and on the sales floor
Point of transfer
When the responsibility for the inventory transfers from the seller to the buyer
Purchase discounts
Provide an incentive for the retailer to pay early on their accounts by issuing a reduced rate on their final purchase cost. The discount reduces the value of merchandise inventory
Purchase returns and allowances
Retailer receives a partial or full refund from the manufacturer for defective merchandise
Sales discounts
Reduction in the selling price offered to customers who pay their account within the discount period. The actual account is a contra revenue account that reduces sales
Sales returns and allowances
Contra revenue account with a normal debit balance that reduces the gross sales figure at the end of the period. The customer returns merchandise with a sales return, and keeps the merchandise with a sales allowance
Service company
Provides intangible services to customers, and doesn’t have inventory
Merchandise inventory
Goods held for sale at a given point in the period
Perpetual inventory system
System that automatically updates and records the inventory account every time a sale or purchase of inventory occurs
Purchases
New acquisitions of merchandise inventory during the period
