Accounting CH.9 -CH.12

Classified balance sheet

A balance sheet that categorizes assets as current assets or plant and equipment and groups liabilities as current or longterm.

Sales Invoice

A bill sent to customers reflecting a credit sale.

Accounts receivable subsidiary ledger

A book or file that contains the individual records in alphabetical order, of amounts owed by various credit customers.

Receiving report

A business form used to notify the appropriate people of the ordered goods received along with the quantities and specific condition of the goods.

Purchases discount

A contra-cost account in the general ledger that records discounts offered by vendors of merchandise for prompt payment of purchases by buyers.

Purchases Returns and allowances

A contra-cost account in the ledger that records the amount of defective or unacceptable merchandise returned to suppliers and or price reductions given for defective items.

Sales discount account

A contra-revenue account that records cash discounts granted to customers for payments made within a specific period of time.

Sales Returns and Allowances account

A contra-revenue account that records price adjustments and allowances granted on merchandise that is defective and has been returned.

Freight-in

A cost of goods sold account that records the shipping cost to the buyer.

Purchase order

A form used in business to place an order for the buying of goods from a seller.

Purchases requisition

A form used within business by the requesting department asking the purchasing department of the business to buy specific goods.

Subsidiary ledger

A ledger that contains accounts of a single type. Example: The accounts receivable subsidiary ledger records all credit customers.

Mortgage payable

A liability account showing amount owed on a mortgage.

Unearned revenue

A liability account that records amount owed for goods or services in advance of delivery. The cash account would record the receipt cash.

Schedule of accounts receivable

A list of the customers in alphabetical order that have an outstanding balance in the accounts receivable subsidiary ledger. this total should be equal to the accounts receivable controlling account in the general ledger at the end of the month.

Debit memorandum

A memo issued by a purchaser to a seller, indicating that some purchases returns and allowances have occurred and therefore the purchaser now owes less money on account.

Discount period

A period shorter than the credit period when a discount is available to encourage early payment of bills.

Credit memorandum

A piece of paper sent by the seller to a customer who has returned merchandise previously purchased on credit. The credit memorandum indicates to the customer that the seller is reducing the amount owed by the customer.

Controlling account- accounts recievable

Accounts receivable account in the general ledger, after postings are complete, shows a firm the total amount of money owed to it. This figure is broken down in the accounts receivable subsidiary ledger, where it indicates specifically who owes the money.

Sales Discount

Amount a customer is allowed to deduct from the bill total for paying a bill during the discount period.

Sales tax payable account

An account in the general ledger that accumulates the amount of sales tax owed. It has a credit balance.

Merchandise inventory

An asset and perpetual inventory system account that records purchases of merchandise. Discounts and returns are recorded in this account for the buyer.

perpetual inventory system

An inventory system that keeps continual track of each type of inventory by recording units on hand at beginning, units sold, and the current balance after each sale or purchase.

Periodic inventory system

An inventory system that, at the end of each accounting period, calculates the cost of the unsold goods on hand by taking the cost of each unit times the number of units on hand of each product.

other income

Any revenue other than revenue from sales. It appears in separate section on the income statement. Example is rental income or storage fees.

Current assets

Assets that can be converted into cash or used within one year or the normal operating cycle of the business, which ever is longer.

operating cycle

Average time it takes to buy and sell merchandise and then collect accounts receivable.

Merchandise

Goods bought into a store for resale to customers.

Net sales

Gross sales less sales returns and allowances less sales discount

Cost of goods sold

In a perpetual inventory system, an account that records the cost of merchandise inventory used to make the sale.

Credit period

Length of time allowed for payment of goods sold on account.

Plant and equipment

Long lived assets such as equipment, buildings or land that are used in the production or sale of goods or services.

purchases

Merchandise for resale. It is a cost

Wholesalers

Merchants who buy goods from suppliers and manufacturers for sale to retailers.

Retailers

Merchants who buy goods from wholesalers for resale to customers.

Gross profit

Net sales less cost of goods sold.

long term liabilities

Obligations that are not due or payable for a long time, usually for more than a year.

Current liabilities

Obligations that will come due within one year or within the operating cycle, whichever us longer.

Selling expenses

Operating expenses directly related to the sale of goods excluding Cost of goods.

Administrative expenses (general expenses)

Operating expenses such as general office expenses that are incurred indirectly in the selling of goods.

Reversing entries

Optional booking keep technique in which certain adjusting entries are reversed or switched on the first day of the new accounting period so the transaction in the new period can be recorded without referring back to prior adjusting entries.

F.O.B shipping point

Purchaser pays or is responsible for the shipping costs from seller's shipping point to purchaser's location.

Controlling account

The account in the general ledger that summarizes or controls a subsidiary ledger. example, the accounts payable account in the general ledger is the controlling account for the accounts payable subsidiary ledger. After postings are complete, it shows the total amount owed from purchases made on account.

Interest expense

The cost of borrowing money.

Beginning merchandise inventory (beginning inventory)

The cost of goods on hand in a company to begin an accounting period.

Ending merchandise inventory (ending)

The cost of goods that remain unsold at the end of the accounting period. It is an asset on the new balance sheet.

Gross sales

The revenue earned from sale of merchandise to customers

Purchase invoice

The seller's sales invoice, which is sent to the purchaser.

Cost of goods sold

Total costs of the goods which were sold to customer.

Accounts payable subsidiary ledger

a book or file that contains, in alphabetical order, the name of the creditor and amount owed from purchases on account.

periodic inventory system

an inventory system, at the end of each accounting period, calculates the cost of the unsold goods on hand by taking the cost of each unit times the number of units of each product on hand.

other expenses

non operating expenses that do not relate to the main operating activities of the business; they appear in a separate section on the income statement. One example given in the text is interest expense, interest owed on money borrowed by the company.

F.O.B destination

seller pays or is responsible for the cost freight to purchasers location or destination.

Invoice approval form

used by the accounting department in checking the invoice and finally approving it for recording and payment.