Accounting ch. 5
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
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| Acid-test ratio: | Ratio used to assess a company's ability to settle its current debts with its most liquid assets; defined as quick assets (cash, short-term investments, and current receivables) divided by current liabilities.
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| Cash discount | Reduction in the price of merchandise granted by a seller to a buyer when payment is made within the discount period.
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| Cost of goods sold: | Cost of inventory sold to customers during a period; also called cost of sales
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| Credit memorandum: | Notification that the sender has credited the recipient's account in the sender's records.
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| Credit period: | Time period that can pass before a customer's payment is due.
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| Credit terms: | Description of the amounts and timing of payments that a buyer (debtor) agrees to make in the future.
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| Debit memorandum | Notification that the sender has debited the recipient's account in the sender's records.
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| Discount period | Time period in which a cash discount is available and the buyer can make a reduced payment.
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| EOM: | Abbreviation for end of month; used to describe credit terms for credit transactions.
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| FOB | Abbreviation for free on board; the point when ownership of goods passes to the buyer;
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| FOB shipping point (or factory) | means the buyer pays shipping costs and accepts ownership of goods when the seller transfers goods to carrier;
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| FOB destination | means the seller pays shipping costs and buyer accepts ownership of goods at the buyer's place of business.
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| General and administrative expenses: | Expenses that support the operating activities of a business.
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| Gross margin: | net sales minus cost of goods sold; also called gross profit
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| Gross margin ratio | Gross margin (net sales minus cost of goods sold) divided by net sales; also called gross profit ratio
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| Gross profit: | net sales minus cost of goods sold; also called gross margin
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| Inventory: | Goods a company owns and expects to sell in its normal operations.
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| List price: | Catalog (full) price of an item before any trade discount is deducted.
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| Merchandise: | Goods that a company owns and expects to sell to customers; also called merchandise inventory.
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| Merchandise inventory | Goods that a company owns and expects to sell to customers; also called merchandise.
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| Merchandiser: | Entity that earns net income by buying and selling merchandise.
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| Multiple-step income statement: | Income statement format that shows subtotals between sales and net income, categorizes expenses, and often reports the details of net sales and expenses.
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| Periodic inventory system: | Method that records the cost of inventory purchased but does not continuously track the quantity available or sold to customers; records are updated at the end of each period to reflect the physical count and costs of goods available.
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| Perpetual inventory system: | Method that maintains continuous records of the cost of inventory available and the cost of goods sold.
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| Purchase discount: | Term used by a purchaser to describe a cash discount granted to the purchaser for paying within the discount period.
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| Retailer: | Intermediary that buys products from manufacturers or wholesalers and sells them to consumers
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| Sales discount: | Term used by a seller to describe a cash discount granted to buyers who pay within the discount period.
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| Selling expenses: | Expenses of promoting sales, such as displaying and advertising merchandise, making sales, and delivering goods to customers
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| Shrinkage: | Inventory losses that occur as a result of theft or deterioration.
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| Single-step income statement: | Income statement format that includes cost of goods sold as an expense and shows only one subtotal for total expenses.
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| Supplementary records: | Information outside the usual accounting records; also called supplemental records.
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| Trade discount: | Reduction from a list or catalog price that can vary for wholesalers, retailers, and consumers.
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| Wholesaler: | Intermediary that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers.
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