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