Income Statement Preparation and Analysis

Contra Revenue accounts

Accounts that reduce gross sales revenue

Credit Terms

Agreed payment conditions between buyer and seller

Accounts Receivable

Amounts owed by customers for credit sales

Inventory Turnover Ratio

COGS divided by average inventory

Perpetual Inventory Method

Continuous tracking of inventory levels

COGAFS

Cost of Goods Available for Sale

COGS

Cost of goods sold; expense account

Allowance for Doubtful Accounts

Estimated uncollectible accounts

FIFO

First in First Out inventory method

LIFO

Last in First Out inventory method

Bank Reconciliations

Matching bank statement with company records

Fraud Triangle

Model for explaining fraud motivations

Days in Inventory

Number of days inventory is held

FOB Shipping Point

Ownership transfers to buyer at shipment

Gross Profit Rate

Ratio of gross profit to net sales

Sarbanes-Oxley Act

Regulation for corporate governance and reporting

Petty Cash Fund

Small fund for minor expenses

Actual Cost Flow

Specific identification of costs

Income Summary

Temporary account for closing entries

Cost of Goods Purchased

Total cost of goods acquired in a period

Net Sales

Total sales minus sales returns and allowances

Notes Receivable

Written promise for future payment