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Merchandiser

answer

a business that sells merchandise, or goods, to customers

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Merchandise Inventory

answer

the merchandise that a business sells to customers

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Wholesaler

answer

a type of merchandiser that buys goods from manufacturers then sells them to retailers

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retailer

answer

a type of merchandiser that buys merchandise either from a manufacturer or a wholesaler and then sells them to consumers

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Vendor

answer

the individual or business from whom a company purchases goods

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Cost of Goods Sold (COGS)

answer

the cost of the merchandise inventory that the business has sold to customers

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Gross Profit

answer

excess of net sales revenue over cost of goods sold

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Operating Expenses

answer

Expenses, other than the cost of goods sold, that are incurred in the entity's major line of business

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Periodic Inventory System

answer

an inventory system that requires businesses to obtain a physical count of inventory to determine the quantities on hand

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Perpetual Inventory System

answer

an inventory that keeps a running computerized record of merchandise inventory

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Invoice

answer

A seller's request for payment from the purchaser

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Purchase Discount

answer

a discount that businesses offer to purchasers as an incentive for early payment

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Credit Terms

answer

the payment terms of purchase or sale as stated on the invoice

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Purchase Returns

answer

a situation in which sellers allow purchasers to return merchandise that is defective, damaged, or otherwise unsuitable

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Purchase Allowance

answer

an amount granted to a purchaser as an incentive to keep goods that are not "as ordered"

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FOB Shipping Point

answer

a situation in which buyer takes ownership (title)to the goods after the goods leave the sellers place of business (shipping point) and the buyer typically pays the freight

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FOB Destination

answer

A situation in which the buyer takes ownership (title) to the goods at the delivery destination point and the seller typically pays the freight

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Freight In

answer

The transportation cost to ship goods into the purchaser's warehouse, therefore, it is freight on purchased goods.

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Freight Out

answer

The transportation cost to ship goods out of the seller's warehouse, therefore it is freight on goods sold to a customer

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Net cost of inventory purchased equation

answer

purchase cost of inventory - purchase returns and allowances - purchase discounts + freight in

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Sales Revenue

answer

the amount that a merchandiser earns from selling it's inventory

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Sales Discounts

answer

reduction in the amount of cash received from a customer for early payment

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Sales Returns and Allowances

answer

Decrease's in a sellers receivable from a customer's return of merchandise or from granting the customer an allowance from the amount owed to the seller

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Net Sales Revenue

answer

The amount a company has made on sales of merchandise inventory after returns, allowances, and discounts have been taken out.

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Inventory Shrinkage

answer

the loss of inventory that occurs because of theft, damage, and errors.

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Single Step Income Statement

answer

income statement format the groups all revenues together and then lists and deducts all expenses together without calculating any subtotals

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Multi-Step Income Statement

answer

Income statement format that contains subtotals to highlight significant relationships. In addition to net income, it reports gross profit and operating income.

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Selling Expenses

answer

expenses relating to marketing and selling a company's product

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administrative expenses

answer

expenses incurred that are not related to marketing the company's products

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Operating Income

answer

Measures the results of the entity's major ongoing activities. Gross profit minus operating expenses.

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Other Revenue and Expenses

answer

Revenues or expenses that are outside the normal day to day operations of a business, such as gain or loss on the sale of plant assets or interest expense

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Gross Profit Percentage

answer

Measures the profitability of each sales dollar above the cost of a good sold. Gross profit / net sales revenue.

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Net purchases

answer

purchases - purchase returns and allowances - purchase discounts

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Consistency Principal

answer

a business should use the same accounting methods and procedures from period to period

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Disclosure Principal

answer

a business financial statement must report enough information for outsiders to make knowledgeable decisions about the company

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Materiality Concept

answer

a company must perform strictly proper accounting for items that are significant to the business's financial situation

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conservatism

answer

a business should report the least favorable figures in the financial statements when two or more possible options are presented

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Inventory costing method

answer

a method of approximating the inventory costs in a business that is used to determine the amount of cost of goods sold and ending merchandise inventory

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specific identification method

answer

an inventory costing method based on the specific cost of particular units of inventory

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first in first out (FIFO) method

answer

an inventory costing method in which the first costs into inventory are the are the first cost out of costs of goods sold. Ending inventory is based on the cost of the most recent purchases.

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costs of goods available for sale

answer

the total cost spent on inventory that was available to be sold during a period

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Last in first out (LIFO) method

answer

an inventory costing method in which the last costs into inventory are the first costs out to costs of goods sold. The method leaves the oldest costs-- those of beginning inventory and the earliest purchases of the period-- in ending inventory.

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Weighted average method

answer

an inventory costing method based on the weighted average cost per unit of inventory that is calculated after each purchase. Weighted average cost per unit is determined by dividing the cost of good available for sale by the number of units available.

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Lower-of-Cost-or-Market (LCM) Rule

answer

Rule that merchandise inventory should be reported in the financial statements at whichever is lower-- its historical cost or its market value

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Inventory Turnover

answer

measures the number of times a company sells its average level of merchandise inventory during a period. cost of goods sold/ average merchandise inventory

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Days' Sales in Inventory

answer

measures the average number of days that inventory is held by company. 365 days/ inventory turnover

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Gross Profit Method

answer

a way to estimate ending merchandise inventory on the basis of the cost of goods sold formula and the gross profit percentage

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Retail Method

answer

a way to estimate the cost of ending merchandise inventory on the basis of the ratio of the goods available for sale at cost to the goods available for sale at retail

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