77 Cards in this Set
| Front | Back |
|---|---|
|
cost of merchandise sold
|
when merchandise is sold, the revenue is reported as sales and its cost is recognized as an espense
|
|
gross profit
|
merchandise sold subtracted from the sales. The profit before deducting operating expenses
|
|
merchandise inventory
|
merchandise on hand at the end of an accounting period
|
|
multiple-step income statement
|
contains several sections, subsections, and subtotals
|
|
sales
|
the total amount charged customers for merchandise sold
|
|
sales returns and allowances
|
granted by the seller to customers for damaged or defective merchandise
|
|
sales discounts
|
granted by the seller to customers for early payment of amounts owed
|
|
net sales
|
determined by subtracting sales returns and allowances and sales discounts from sales
|
|
purchases returns and allowances
|
sellers grant a buyer sales returns and allowances for returned or damaged merchandise
|
|
purchase discounts
|
sellers grant a buyer a sales discount for early payment of the amount owed
|
|
net purchases
|
returns and allowances and purchases discounts subtracted from purchases
|
|
freight in
|
freight costs incurred in obtaining the merchandise increase the cost of the merchandise purchased
|
|
cost of merchandise purchased
|
adding freight in to net purchases yields
|
|
Merchandise available for sale
|
beginning inventory plus the cost of merchandise purchased
|
|
periodic inventory system
|
method of determining the cost of merchandise sold and the amount of merchandise on hand
|
|
perpetual inventory system
|
each purchase and sale of merchandise is recorded in the inventory and the cost of merchandise sold accounts
|
|
income from operations (operating income)
|
determined by subtracting operating expenses from gross profit
|
|
selling expenses
|
incurred directly in the selling of merchandise
|
|
administrative expenses (general expenses)
|
incurred in the administration or general operations of the business
|
|
other income
|
revenue from sources other than the primary operating activity of a business
|
|
other expense
|
expense that cannot be traced directly to the normal operations of the business
|
|
single-step income statement
|
deducts the total of all expenses in one step from the total of all revenues
|
|
report form
|
a downward sequence in three sections of the balance sheet
|
|
indirect method
|
the net cash flows from operating activities
|
|
invoice
|
bill that seller sends to the buyer
|
|
credit terms
|
the terms for when payments for merchandise are to be made
|
|
credit period
|
buyer is allowed an amount of time in which to pay
|
|
credit memorandum
|
shows the amount of and the reason for the sellers credit to an account receivable
|
|
debit memorandum
|
informs the seller of the amount the buyer proposes to decrease to the account payable due to the seller
|
|
free on board shipping point FOB
|
the ownership of the merchandise may pass to the buyer when the seller delivers the merchandise to the freight carrier or transportation company
|
|
free on board destination FOB
|
the ownership of the merchandise may pass to the buyer when the buyer receives the merchandise
|
|
inventory shrinkage (shortage)
|
the physical inventory on hand at the end of the accounting period i usually less than the balance of merchandise inventory
|
|
sarbanes-oxley act of 2002
|
purpose is to restore public confidence and trust in the financial reporting of caompanies
|
|
internal control
|
the procedures and processes used by a company to safeguard its assets, process info accurately, and ensure compliance with laws and regulations
|
|
employee fraud
|
intentional act of deceiving an employer for personal gain
|
|
elements of internal control
|
control environment, risk assessment, control procedures, monitoring, information and communication
|
|
cash
|
coins, currency (paper money), checks, and money orders
|
|
cash short and over account
|
used to record the difference between the amount of cash in a cash register and the amount of cash that should be on hand according to the records
|
|
electronic funds transfer EFT
|
customers may authorize automatic electronic transfers from their checking accounts
|
|
voucher system
|
a set of procedures for authorizing and recording liabilities and cash payments
|
|
voucher
|
any document that serves as proof of authority to pay cash or issue and electronic funds transfer
|
|
bank reconciliation
|
analysis of the items and amounts that result in the cash balance reported in the bank statement differing from the balance of the cash account in the ledger
|
|
petty cash fund
|
a special purpose cash fund to pay relatively small amounts
|
|
cash equivalents
|
highly liquid investments that are usually reported with cash on the balance sheet
|
|
receivables
|
all money claims against other entities, including people, companies and other organizations
|
|
accounts receivable
|
normally collected within a short period such as 30-60 days
|
|
maturity value
|
the amount that must be paid at the due date of the note
|
|
bad debt expence
|
operating expense recorded from uncollectible receivables
|
|
direct write-off method
|
records bad debt expense only when an account is determined to be worthless
|
|
allowance method
|
records bad debt expense by estimating uncollectible accounts at the end of the accounting period
|
|
allowance for doubtful accounts
|
the contra asset account for accounts receivable
|
|
aging the receivables
|
the process of analyzing the accounts receivable and classifying them according to various age groupings with the due date being the base point for determining age
|
|
merchandise inventory
|
merchandise on hand at the end of the period is a current asset
|
|
materials inventory
|
the cost of raw materials used in manufacturing a product
|
|
work in process inventory
|
the costs for partially completed product
|
|
finished goods inventory
|
the costs for completed product
|
|
cost of goods sold
|
the cost of products sold
|
|
specific identification inventory cost flow method
|
the unit sold is identified with a specific purchase
|
|
first in first out inventory cost flow method (FIFO)
|
the first units purchased are assumed to be sold and the ending inventory is made up of the most recent purchases
|
|
last in first out inventory cost flow method (LIFO)
|
the last units purchased are assumed to be sold and the ending inentory is made up of the first purchases
|
|
average cost inventory cost flow method
|
the cost of the units sold and in ending inventory is an average of the purchase costs
|
|
LIFO conformity rule
|
a financial reporting rule requiring a firm that elects to use LIFO inventory valuation for tax purposes to also use LIFO for external financial reporting
|
|
LIFO reserve
|
a required disclosure for LIFO firms showing the difference between inventory valued under FIFO and inventory valued under LIFO
|
|
net realizable value
|
where merchandise should be valued (net realizable value = estimated selling price - direct costs of disposal)
|
|
lower of cost or market method LCM
|
a method of valuing inventory that reports the inventory at the lower of its cost or current market value
|
|
amortization
|
the periodic transfer of the cost of an intangible asset to expense
|
|
capital expenditures
|
the costs of acquiring fixed assets adding a component or replacing a component of a fixed asset
|
|
copyright
|
an exclusive right to publish and sell a literary, artistic, or musical composition
|
|
depletion
|
the process of transferring the cost of natural resources to an expense account
|
|
depreciation
|
the systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life
|
|
goodwill
|
an intangible asset of a business that is created from favorable factors such as location, product quality, reputation and mangerial skill as verified from a merger transaction
|
|
intangible assets
|
long lived assets without tangible properties that are used in the operations of a business and are not held for sale
|
|
patents
|
exclusive rights to produce and sell goods with one or more unique features
|
|
residual value
|
the estimated value of a fixed asset at the end of its useful life
|
|
revenue expenditures
|
costs that benefit only the current period or costs incurred for normal maintenance and repairs of fixed assets
|
|
straight line method
|
a method of depreciation that provides for equal periodic depreciation expense over the estimated life of a fixed asset
|
|
trademark
|
a name term or symbol used to identify a business and its products
|
ACCT 102: TEST 1