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Prin. Acct. Ch. 5

Terms and Definitions

QuestionAnswer
Administrative Expenses Expenses relating to general operating activities such as personnel management, accounting, and store security.
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 that the seller places the goods free on board to the buyer's place of business, and the seller pays the frieght.
FOB Shipping Point Freight terms indicating that the seller places goods free on board the carrier, and the buyer pays the freight costs.
Gross Pofit The excess of net sales over the cost of goods sold.
Gross Profit Rate Gross profit expressed as a percentage, by dividing the amount of gross profit by net sales.
Income from Operations Income from a company's principal operating activity; determined by subtracting cost of goods sold and operating expenses from net sales.
Multiple-Step Income Statment An income statement that shows several steps in determining net income.
Net Sales Sales less sales returns and allowances and less sales discounts.
Non-Operating Activities Various revenues, expenses, gains, and losses that are unrelated to a company's main line of operations.
Operating Expenses Expense incurred in the process of earning sales revenues.
Other Expenses and Losses A non-operating activities section of the income statement that shows expenses from auxiliary operations and losses unrelated to the company's operations.
Other Revenues and Gains A non-operating activities section of the income statement that shows revenues from auxiliary operations and gains unrelated to the company's operations.
Periodic Inventory System An inventory system under which the company does not keep detailed inventory records throughout the accounting period but determines the cost 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 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 prompt payment of credit sale.
Sales Invoice A document that supports each credit sale.
Sales Returns and Allowances Purchase returns and allowances from the seller's perspective.
Sales Revenue (Sales) The primary source of revenue in a merchandising company.
Selling Expenses Expenses associated with making sales.
Single-Step Income Statement An income statement that shows only one step in determining net income.
Popular Accounting sets

 

 



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