Every term, formula, and entry

Terms

C1 Merchandise

Write it in your words

Products a company owns and intends to sell to customers.

C1 Merchandiser

Write it in your words

A company that earns revenue by buying and selling products rather than making or performing them.

C1 Wholesaler

Write it in your words

A merchandiser that buys from manufacturers and sells to other merchandisers, not to the final consumer.

C1 Retailer

Write it in your words

A merchandiser that buys from wholesalers or manufacturers and sells to the final consumer.

C1 Merchandise inventory

Write it in your words

Products a merchandiser owns and holds for resale, reported as a current asset.

C1 Cost of goods sold

Write it in your words

The cost of the merchandise a company sold during a period; an expense matched against the revenue from those sales.

C1 Gross profit (gross margin)

Write it in your words

Net sales minus cost of goods sold — what is left before operating expenses.

C1 Operating cycle

Write it in your words

The time it takes a merchandiser to spend cash on inventory and collect cash from selling it.

C1 Perpetual inventory system

Write it in your words

A system that updates the Merchandise inventory account continuously, with each purchase and each sale.

C1 Periodic inventory system

Write it in your words

A system that updates Merchandise inventory only at period end, by physically counting what remains.

C2 Invoice

Write it in your words

An itemized statement of goods sold, listing quantities, prices, and credit terms — the buyer's source document for a purchase.

C2 List price

Write it in your words

The price a seller normally asks for an item, before any trade discount.

C2 Trade discount

Write it in your words

A reduction from list price used to arrive at the invoice price. It is never recorded — only the discounted price enters the books.

C2 Credit terms

Write it in your words

The time allowed for payment, and any discount for paying within part of that time — for example, 2/10, n/30.

C2 Credit period

Write it in your words

The full time allowed before the invoice is due in full — the "n" number in credit terms.

C2 Discount period

Write it in your words

The time period in which a discount is available for early payment — the first number in credit terms.

C2 EOM

Write it in your words

"End of month" — credit terms measured from the end of the month of sale rather than the invoice date.

C2 Purchases discount

Write it in your words

A cash discount taken by a buyer for paying within the discount period; under the perpetual system, it reduces Merchandise inventory.

C2 Purchases returns

Write it in your words

A reduction in a purchase because the buyer sent unwanted or defective goods back to the seller.

C2 Purchases allowances

Write it in your words

A reduction in the price a buyer owes because of a problem with a purchase, granted without returning the goods.

C3 Sales discount

Write it in your words

A cash discount a seller offers a buyer for early payment; a contra-revenue account, subtracted from Sales.

C3 Sales returns

Write it in your words

Merchandise customers return to the seller after a sale.

C3 Sales allowances

Write it in your words

A reduction in what a customer owes because of a problem with a sale, granted without a return of goods.

C2 FOB shipping point

Write it in your words

Ownership of goods passes to the buyer when the goods leave the seller’s dock; the buyer owns them in transit and pays the freight.

C2 FOB destination

Write it in your words

Ownership of goods passes to the buyer only when the goods arrive; the seller owns them in transit and pays the freight, as a selling expense.

C1 Shrinkage

Write it in your words

Inventory lost to theft, damage, or error, discovered when a physical count comes up short of the records.

P2 Multiple-step income statement

Write it in your words

An income statement format that separates gross profit and income from operations from other revenues, gains, expenses, and losses.

P2 Single-step income statement

Write it in your words

An income statement format that groups all revenues together and all expenses together, in one subtraction.

P2 Selling expenses

Write it in your words

Expenses of promoting sales, such as advertising, sales salaries, and delivery of goods sold.

P2 General and administrative expenses

Write it in your words

Expenses of running the business as a whole rather than selling — office salaries, for example.

P2 Gross margin ratio

Write it in your words

Gross profit divided by net sales; the share of each sales dollar left after covering the cost of the goods sold.

A2 Acid-test (quick) ratio

Write it in your words

Cash, short-term investments, and current receivables, divided by current liabilities — a stricter test than the current ratio because it excludes inventory.

C3 Sales refund payable

Write it in your words

A liability for expected future returns, estimated at period end so revenue is not overstated. [book?] — check whether this edition introduces it in this chapter.