Accounting Chapter 5
EOM
End Of Month
FOB
Free On Board
Wholesaler
an intermediary that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers
Retailer
an intermediary that buys products from manufacturers or wholesalers and sells them to consumers
Cash Discount
can be granted by a seller to encourage buyers to pay earlier
Merchandise
consists of products (goods) that a company acquires to resell to customers
Perpetual Inventory System
continually updates accounting records for merchandising transactions
Merchandiser
earns net income by buying and selling merchandise
Multiple-Step Income Statement
format that shows detailed computations of net sales and other costs and expenses and reports subtotals for various classes of items
Purchase Discount
how a buyer views a cash discount
Sales Discount
how a seller views a cash discount
Credit Terms
include the amounts and timing of payments from a buyer to a seller
Selling Expenses
include the expenses of promoting sales by displaying and advertising merchandise, making sales, and delivering goods to customers
Supplementary Records
information outside the usual general ledger accounts
Credit Memorandum
informs a buyer of the seller's credit to the buyer's Account Receivable
Debit Memorandum
informs the seller of a debit made to the seller's account in the buyer's records
Single-Step Income Statement
lists costs of goods sold as another expense and shows only one subtotal for total expenses
Sales Returns
merchandise that customers return to the seller after a sale
Gross Profit/Margin
net sales less cost of goods sold
FOB Destination
ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business
Inventory
products a company owns and expects to sell in its normal operations
Merchandise Inventory
products that a company owns and intends to sell
Sales Allowance
reductions in the selling price of merchandise sold to customers
Shrinkage
refers to the loss of inventory and is computed by comparing a physical count of inventory with recorded amounts
General and Administrative Expenses
support a company's overall operations and include expenses related to accounting, human resource management, and financial management
Credit Period
the amount of time allowed before full payment is due
FOB Shipping Point
the buyer accepts ownership when the goods depart the seller's place of business
Cost of Goods Sold
the expense of buying and preparing the merchandise
Periodic Inventory System
updates the accounting records for merchandising transactions only at the end of a period