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Kimmel Ch. 5 vocab

QuestionAnswer
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
Created by: 1387740222