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Kimmel Ch. 5 vocab
| Question | Answer |
|---|---|
| contra revenue account | an account that is offset against revenue account on the income statement |
| cost of goods sold (COGS) | the total cost of merchandise sold during the period |
| gross profit | 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 |
| net sales | sales less sales returns and allowances and sales discounts |
| periodic inventory system | an inventory system in which a company does not maintain detailed records of goods on hand and determines the cost of goods sold only at the end of an accounting period |
| perpetual inventory system | a detailed inventory system in which a company maintains the cost of each inventory item and the records continuously show the inventory that should be on hand |
| profit margin ratio | measures the percentage of each dollar of sales that results in net income |
| profit margin ratio formula | net income / net sales |
| 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 purchase |
| purchase return | a return of goods from the buyer to the seller for cash or credit |
| quality of earnings ratio | a measure used to indicate the extent to which a company's earnings provide a full and transparent depiction of its performance |
| quality of earnings ratio formula | net cash provided by operating activities / net income |
| sales discount | a reduction given by a seller for prompt payment of a credit sale |
| sales invoice | a document that provides support for each sale |
| sales returns and allowances | transactions in which the seller either accepts goods back from the purchaser (a return ) or grants a reduction in the purchase price (an allowance) so that teh buyer will keep the goods |
| sales revenue | primary source of revenue in a merchandising company |
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