Chapter 4 Terminology Flashcards
(21 cards)
Merchandise
Refers to products that a company buys to resell.
Merchandiser
Earns net income by buying and selling merchandise
Wholesaler
Buys products from manufacturers and sells them to retailers
Retailers
Buy products from manufactures or wholesalers and sells them to customers
Revenue from selling merchandise is called sales, and the expense of buying and preparing merchandise is called ___________.
Cost of goods sold.
Gross profit or gross margin
Is net sales minus cost of goods sold
Merchandise inventory, or simply inventory
Refers to products that a company owns and intends to sell.
Perpetual inventory system
Records cost of goods sold at the time of each sale.
Periodic inventory system
Records cost of goods sold at the end of the period.
Credit terms
Includes the amounts and timings of payments from a buyer to a seller.
A buyer views a cash discount as a _____.
Purchase discount.
A seller views a discount as a:
Sales discount
Gross method
Records the purchase at its gross (full) invoice amount.
FOB (free on board) point
When ownership transfers from the seller to the buyer
Supplementary records
Information outside the usual ledger accounts.
The perpetual accounting system requires that:
Each sales transaction for a merchandiser, whether for cash or on credit, has two entries: one for revenue and one for cost.
Net method
Records sales at the net amount, which assumes all discounts are taken.
Shrinkage
The loss of inventory
Multiple-step income statement
details net sales and expenses and reports subtotals for various types of items.
Selling expenses
Costs to market and distribute products and services such as advertising of merchandise.
General and administrative expenses
Costs to administer a company, such as office salaries and office equipment.
