Chapter 5 Vocabulary Flashcards Preview

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Flashcards in Chapter 5 Vocabulary Deck (41):
1

account form

The form of balance sheet that resembles the basic format of the accounting equation; with assets on the left side and Liabilities and Stockholder’s Equity sections on the right side.

2

account form

The subsidiary ledger containing the individual accounts with suppliers (creditors).

3

accounts receivable subsidiary ledger

The subsidiary ledger containing the individual accounts with customers.

4

administrative expense

An analysis and updating of the accounts when financial statements are prepared.

5

allowances

The method of accounting for uncollectible accounts that provides an expense for uncollectible receivables in advance of their writeoff.

6

controlling account

The account in the general ledger that summarizes the balances of the accounts in a subsidiary ledger.

7

cost of merchandise sold

The cost that is reported as an expense when merchandise is sold.

8

credit memorandum

Amount entered on the right side of an account.

9

credit period

The amount of time the buyer is allowed in which to pay the seller.

10

credit terms

Terms for payment on account by the buyer to the seller.

11

customer discounts

A variety of discounts offered by the seller as incentive for the customer to act in a way benefiting the seller.

12

customer returns and allowances

Sometimes called sales returns and allowances; these are returns to the seller by the customer or reductions from the initial selling price due to defective or damaged merchandise or goods that did not meet the customer’s expectations.

13

debit memorandum

Amount entered on the left side of an account.

14

destination

The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life.

15

general ledger

The primary ledger; when used in conjunction with subsidiary ledgers; that contains all of the balance sheet and income statement accounts.

16

gross profit

Sales minus the cost of merchandise sold.

17

income from operations

Cumulative preferred stock dividends that have not been paid in prior years are said to be in arrears.

18

inventory shrinkage

A company’s ability to manage its inventory effectively.

19

inventory subsidiary ledger

A ledger containing individual accounts with a common characteristic.

20

invoice

The bill that the seller sends to the buyer.

21

ledger

A group of accounts for a business.

22

merchandise inventory

Merchandise on hand (not sold) at the end of an accounting period.

23

multiple-step income

A method that allocated factory overhead to product by using factory overhead rates for each production department.

24

operating cycle

The process by which a company spends cash; generates revenues; and receives cash either at the time the revenues are generated or later by collecting an accounts receivable.

25

other expense

Expenses that cannot be traced directly to operations.

26

other income

Revenue from sources other than the primary operating activity of a business.

27

periodic inventory system

The inventory system in which the inventory records do not show the amount available for sale or sold during the period.

28

perpetual inventory system

The inventory system in which each purchase and sale of merchandise is recorded in an inventory account.

29

physical inventory

A detailed listing of merchandise on hand.

30

purchases discounts

Discounts taken by the buyer for early payment of an invoice.

31

ratio of sales to assets

Ratio that measures how effectively a company uses its assets; computed as net sales divided by average total assets.

32

report form

The form of balance sheet with the Liabilities and Owner’s Equity sections presented below the Assets section.

33

sales

The total amount charged customers for merchandise sold; including cash sales and sales on account.

34

sales discounts

From the seller’s perspective; discounts that a seller may offer the buyer for early payment.

35

selling expenses

Expenses that are incurred directly in the selling of merchandise.

36

shortage

An overhead activity that consists of changing tooling in machines in preparation for making a new product.

37

single-step income statement

A form of income statement in which the total of all expenses is deducted from the total of all revenues.

38

special journals

Journals designed to be used for recording a single type of transaction.

39

statement

Performance goals; often relating to how much a product should cost.

40

subsidiary ledger

A ledger containing individual accounts with a common characteristic.

41

trade discounts

Discounts from the list prices in published catalogs or special discounts offered to certain classes of buyers.