Unit V Flashcards
Chapters 5 and 6
#1
Administrative expenses
Review
Expenses incurred that are not
related to marketing the company’s
goods and services.
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#2
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Cost of Good Sold (COGS)
The cost of the merchandise
inventory that the business has sold
to customers.
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#3
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Credit terms
The payment terms of purchase or
sale as stated on the invoice.
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#4
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FOB destination
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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#5
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FOB shipping point
Situation in which the buyer takes
ownership (title) to the goods after
the goods leave the seller’s place of
business (shipping point) and the
buyer typically pays the freight.
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#6
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Gross profit
Excess of net Sales Revenue over
Cost of Goods Sold.
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#7
Gross profit percentage
Review
Measures the profitability of each
sales dollar above the cost of
goods sold. Gross profit / Net sales
revenue.
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#8
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Inventory shrinkage
The loss of inventory that occurs
because of theft, damage, and
errors.
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#9
Invoice
Review
A s e l l e r’s re qu e s t f or p a yme nt
f rom t he p u rcha s e r.
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#10
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Merchandise inventory
T h e me rcha ndis e t ha t a bu s ine s s
s e l l s t o cu s t ome rs .
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#11
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Merchandiser
A bu s i n e s s t ha t s e l l s me rcha ndis e
or g oods t o cu s t ome rs .
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#12
Retailer
Review
A t yp e of me rcha ndis e r t ha t
bu ys me rcha n di s e e i t he r f rom
a ma n u f a ct u re r or a whol e s a l e r
a n d t h e n s e l l s t hos e g oods t o
cons u me rs .
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#13
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Wholesaler
A t yp e of me rcha ndis e r t ha t bu ys
g oods f rom ma n u f a ct u re rs a nd t he n
s e l l s t he m t o re t a il e rs .
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#14
Review
Multi-step income statement
In come s t a t e me nt f orma t t ha t
con t a i n s s u bt ot a l s t o hi g hl ight
s i g n i f i ca n t re l a t ions hip s . In a ddit ion
t o n e t i n come , it re p ort s g ros s p rof it
a n d op e ra t ing income .
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#15
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Net sale revenue
The amount a company has
earned on sales of merchandise
inventory after returns, allowances,
and discounts have been taken
out. Sales Revenue less Sales
Returns and Allowances and Sales
Discounts.
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#16
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Operating expenses
E x p e n s e s , ot he r t ha n C os t of G oods
S ol d, t ha t a re i n cu rre d i n t he e nt it y’s
ma j or ong oing op e ra t ions .
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#17
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Operating income
M e a s u re s t he re s u l t s of t he e nt it y’s
ma j or on g oi n g a ct i vi t i e s . G ross
p rof i t minu s op e ra t ing e xp e ns e s .
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#18
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Periodic inventory system
A n i n ve n t ory s ys t e m t ha t re qu ire s
bu s i n e s s e s t o obt a i n a p hysical
cou n t of inve nt ory t o de t e rmine
qu a nt it ie s on ha nd.
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#19
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Perpetual inventory system
A n i n ve nt ory s ys t e m t ha t ke e p s a
ru n n i n g comp u t e ri ze d re cord of
m e r ch a n dis e in ve n t ory.
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#20
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Consistency principle
A bu s i n e s s s h ou l d u s e t he s a me a ccou nt ing
me t hods a n d p roce du re s f rom p e riod t o p e riod.
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#21
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Disclosure principle
A bu s i n e s s ’s f i na ncia l s t a t e me nt s mu s t re p ort
e nou g h i n f orma t ion f or ou t s ide rs t o ma ke
knowl e dg e a bl e de cis ions a bou t t he comp a ny.
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#22
First-in, First-out (FIFO) method
Review
A n inve n t ory cos t ing me t hod in which t he f irs t
cos t s in t o i n ve n t ory a re t he f irs t cos t s ou t t o cos t
of g oods s ol d. E nding inve nt ory is ba s e d on t he
cos t s of t he mos t re ce nt p u rcha s e s .
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#23
Last-in, First-out (LIFO) method
Review
A n inve n t ory cos t ing me t hod in which t he l a s t
cos t s in t o i n ve n t ory a re t he f irs t cos t s ou t t o cos t
of g oods s ol d. T he me t hod l e a ve s t he ol de s t
cos t s - t h os e of be g inning inve nt ory a nd t he
e a rl i e s t p u rcha s e s of t he p e riod - in e nding
inve nt ory.
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Reference
Miller-Nobles, T., Mattison, B., & Matsumura, E. M. (2016). Horngren’s
accounting (11th ed.). Upper Saddle River, NJ: Pearson.
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