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Accounting Chp5

Terms

TermDefinition
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.
Cash Discount Reduction in the price of merchandise granted by a seller to a buyer when payment is made within the discount period.
Cost of Goods Sold Cost of inventory sold to customers during a period; also called cost of sales.
Credit Memorandum Notification that the sender has credited the recipient’s account in the senders records.
Credit Period Time period that can pass before a customer’s payment is due.
Credit Terms Description of the amounts and timing of payments that a buyer (debtor) agrees to pay in the future.
Debit Memorandum Notification that the sender has debited the recipient’s account in the sender’s records.
Discount Period Time period in which a cash discount is available and the buyer can make a reduced payment.
EOM Abbreviation for end of the month; used to describe credit terms for credit transactions.
FOB Abbreviation for Free on Board; the point when ownership of goods passes to buyer.
FOB shipping point means the buyer pays shipping costs and accepts ownership of goods when the seller transfers goods to carrier.
FOB destination means the seller pays shipping costs and accepts ownership of goods at the buyer’s place of business.
General and Administrative Expenses Plan that show’s predicted operating expenses not included in the selling expenses budget.
Gross Margin/ Gross Profit Net sales minus cost of goods sold.
Gross Margin Ratio/Gross profit ratio Net sales minus cost of goods sold divided by net sales.
Inventory Goods a company owns and expects to sell in its normal operations.
List Price Catalog (full) price of an item before any trade discount is deducted.
Merchandise/Merchandise Inventory Good that a company owns and expects to sell to customers.
Merchandiser Entity that earns net income by buying and selling merchandise
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.
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.
Purchase Discount Term used by a purchaser to describe a cash discount granted to the purchaser for paying within the discount period.
Retailer Intermediary that buys products from manufacturers or wholesalers and sells them to consumers.
Sales Discount Term used by seller to describe a cash discount granted to buyers who pay within the discount period.
Selling Expenses Expenses of promoting sales, such as displaying and advertising merchandise, making sales and delivering goods to customers.
Shrinkage Inventory losses that occur as a result of theft or deterioration.
Single-step Income Income statement format that includes cost of goods sold as an expense and shows only one subtotal from that account.
Supplementary records/Supplemental records Information outside the usual accounting records.
Trade discount Reduction from a list or catalog price that can vary for wholesalers, retailers and consumers.
Wholesaler Intermediary that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers.
Created by: Posiniv01