Chapter 5-8 terms

Chapter 5-8 terms - Chapter 5 Cash Discount- Price...

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Chapter 5 Cash Discount- Price reduction on merchandising sold offered by sellers to encourage prompt payment; when taken, represents a sales discount to the seller and a purchase discount to the buyer of the merchandise. p. 247 Common size financial statements- Financial statements in which dollar amounts are converted to percentages to aid in comparing financial data among periods and among companies. p. 259 Cost of good available for sale- Total costs paid to obtain goods and ready them for sale, including the cost of beginning inventory plus purchases and transportation- in costs, less purchase returns and allowances and purchase discounts. pp. 241/242 Cost of goods sold- Total cost incurred for the goods sold during a specific accounting period. pp. 241,242 FOB (free on board) destination- Shipping term that means the seller bears the freight (transportation- in) costs. p. 248 FOB (free on board) shipping point- Shipping term that means the buyer bears the freight (transportation- in) costs. p. 248 Gains- Increases in assets or decreases in liabilities that result from peripheral or incidental transactions. p. 251 Gross margin (Gross profit)- Difference between sales revenue and costs of goods sold; the amount a company makes from selling goods before subtracting operating expenses. pp. 241,242 Gross margin percentage- Expressing gross margin as a percentage of sales by dividing gross margin by net sales; the amount of each dollar of sales that is profit before deducting operating expenses. p. 260 Losses- Decreases in assets or increases in liabilities that result from peripheral or incidental transactions. p. 251 Merchandise inventory- Finished goods held for resale to customers. P. 243 Merchandising businesses- Companies buy and resell merchandise inventory. P.22 Multistep income statement- Income statement format that matches various revenues with related expenses in order to present subtotals (steps) such as gross margin and operating income; distinguishes between routine operating items and non processing items such as gains, losses and interest. Contrast with single- step income statement. p. 254
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Net sales- Sales less returns from customers and allowances or cash discounts granted to customers. P. 259 Operating income (or loss) - Income after subtracting operating expenses from operating revenues. Gains and losses and other peripheral activities are added to or subtracted from operating income to determine net income or loss. P. 253 Period costs- Expenses recognized in the period in which they are incurred regardless of when cash payments for them are made; cost that cannot be directly traced to products. Pp. 67,241 Periodic inventory system- Method of accounting for inventory which requires a physical count of goods on hand at the end of the accounting period in order to determine the amount of costs of goods sold and to update the inventory account. P. 264 Perpetual inventory system- Method of accounting for inventory which the amount of
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Chapter 5-8 terms - Chapter 5 Cash Discount- Price...

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