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Contra Expense Account
- An account that is offset against (reduces) an expense account on the income statement
- Ex. "Purchase and returns" and "Allowances and purchase discounts"
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Contra Revenue Account
- An account that is offset against (reduces) a revenue account on the income statement
- Ex. "Sales returns and allowances" and "Sales discounts"
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Cost of Goods Available for sale
the sum of beginning inventory and the cost of goods purchased
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Cost of goods purchased
The sum of net purchases and freight in
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Cost of Goods Sold
- The total cost of merchandise sold during the period
- In periodic inventory, it is calculated at the end of the accounting period by deducting ending inventory from the cost of goods available for sale
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FOB Shipping Point
a) who responsible
b) who pays
- The buyer is responsible for damage
- The buyer will pay for the shipping costs of the goods from the shipping point until they arrive at their destination
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FOB destination
a) who is responsible
b) who pays
- Seller is responsible for any damage
- seller will pay for the shipping costs of the goods until they arrive at their destination (normally the buyer's place of business)
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Gross Profit Margin
- Gross Profit expressed as a percentage of sales.
- = Gross profit / Net sales
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Gross Sales
Total sales before deducting any sales returns and allowances and sales discounts
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Nature
- A method of organizing expenses on the income statement by way of their natural classification
- e.x. salaries, transportation, depreciation, advertising
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Profit from operations
- The results of a company's normal operating activities
- gross profit - operating expenses
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Profit Margin
- Profit expressed as a percentage of sales
- Profit /Net sales
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Days in inventory
- A liquidity measure of the average number of days that inventory is held
- =365/ inventory turnover ratio
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Inventory Turnover
- A liquidity measure of the number of times, on average, that inventory is sold during the period
- = Cost of Goods Sold/ Average inventory
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Internal Control
A process designed to help an organization achieve reliable financial reporting, effective and efficient operations, and compliance with relevant laws and regulations
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Net Realizable Value (NRV)
The selling price of an inventory item, less any costs required to make the item saleable
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Lower of cost and net realizable value (LCNRV)
A basis for stating inventory at the lower of tis original cost and its net realizable value at the end of the period
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