CH 16

Property

A general term for real estate, but it can also be applied as a legal term for anything owned or possessed.

Plant

A general term for the facilities of a business.

Safety stock

An amount of inventory carried to ensure that you will not run out of inventory because of fluctuating levels of sales.

Point-of-sale system

Hardware and software combinations that integrate inventory management directly into accounting software.

Equipment

Machinery, tools, or materials used in the performance of the work of the business.

Factoring

Selling the rights to collect accounts receivable to an entity outside your business.

Replacement value

The cost incurred to replace one asset with an identical asset

Book value

The difference between the original cost of an asset and the total amount of depreciation expense that has been recognized to date.

Cost of operating

The direct cost incurred in using an asset for the purpose for which it was intended

Whole of life costs

The sum of all costs of capital assets, including acquisition, ownership, operation, and disposal

Replacement cost

The total cost of replacing an asset with an essentially identical asset.

Accounts receivable

money that is owed to your business by your customers

Periodic inventory

process of physically counting business assets on a set schedule

Perpetual inventory

recording the receipt and sale of each item as it occurs

Physical inventory

A count of all the inventory being held for sale at a specific point in time.

Economic order quantity (EOQ)

A statistical technique that determines the quantity of inventory that a business must hold to minimize total inventory cost

Pull-through system

A term for just-in-time inventory systems in which product is ordered and placed into production only after a sale has been completed.

Cost of owning

Cost incurred in financing, insuring, taxing, or tracking an asset

Cost of disposition

Cost incurred in the activities necessary to get rid of an asset.

Inventory valuation

Determination of the amount of assets held by the firm for sale or production.

Pledging receivables

Giving a third party legal rights to debts owed your business in order to provide assurance that borrowed money will be repaid. Usually less expensive than factoring

Optimum stocking level

The amount of inventory that results in the minimum cost, when considering the cost of lost sales resulting from running out of stock, the number of units sold per day, and the number of days required to receive inventory Also known as the reorder point

Disposal value

The net amount realized after subtracting the costs of getting rid of an asset from its selling price.

Just-in-time inventory

The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer.

Fair market value

The price at which goods and services are bought and sold between willing sellers and buyers in an arm's-length transaction

Microinventory

The purchase of inventory only after a sale is made; very typical with Internet firms.

Productivity

The ratio measure of how well a firm does in using its inputs to create outputs, literally, productivity is outputs divided by inputs.

Acquisition cost

The total cost of acquiring an asset, including such costs as purchase price, transportation, installation, testing, and calibrating in order to ready it for its first productive use.