Accounting 101 Chapter 5 Inventories and Cost of Goods Sold

  1. Merchandise Inventory
    The account wholesalers and retailers use to report inventory held for resale
  2. Raw Materials
    The inventory of a manufacturer before the addition of any direct labor or manufacturing overhead.
  3. Work in Process
    The cost of unfinished products in a manufacturing company
  4. Finished Goods
    A manufacturer's inventory that is complete and ready for sale.
  5. Gross Profit
    Net sales less cost of goods sold.
  6. Net Sales
    Sales revenue less sales returns and allowances and sales discounts.
  7. Sales Revenue
    A representation of the inflow of assets.
  8. Sales Returns and Allowances
    Contra-revenue account used to record refunds to customers and reductions of their accounts.
  9. Sales Discounts
    A contra-revenue account used to record discounts given to customers for early payments of their accounts.
  10. Cost of goods available for sale
    Beginning inventory plus cost of goods purchased.
  11. Cost of goods sold
    Cost of goods available for sale minus ending inventory.
  12. Perpetual System
    A system in which the inventory account is increased at the time of each purchase and decreased at the time of each sale.
  13. Periodic System
    A system in which the Inventory account is updated only at the end of the period.
  14. Transportation-In
    An adjunct account used to record freight costs paid by the buyer.
  15. Purchases
    A temporary account used in a periodic inventory system to record acquisitions of merchandise.
  16. Purchase Returns and Allowances
    A contra-purchases account used in a periodic inventory system when a refund is received from a supplier or a reduction is given in the balance owed to the supplier.
  17. Purchase Discounts
    A contra-purchases account used to record reductions in purchase price for early payment to a supplier.
  18. FOB destination point
    Terms that required the seller to pay for the cost of shipping the merchandise to the buyer.
  19. FOB shipping point
    Terms that require the buyer to pay for the shipping costs.
  20. Gross profit ratio
    Gross profit divided by net sales.
  21. Weighted Average Cost Method
    An inventory costing method that assigns the same unit cost to all units available for sale during the period.
  22. FIFO Method
    An inventory costing method that assigns the most recent costs to ending inventory.
  23. LIFO Method
    An inventory costing method that assigns the most recent costs to cost of goods sold.
  24. LIFO Liquidation
    The result of selling more units than are purchased during the period, which can have negative tax consequences if a company is using LIFO.
  25. LIFO Conformity Rule
    The IRS requirement that when LIFO is used on a tax return, it must also be used in reporting income to stockholders.
  26. Replacement Cost
    The current cost of a unit of inventory
  27. Inventory Profit
    The portion of the gross profit that results from holding inventory during a period of rising prices.
  28. Lower-of-cost-or-market rule (LCM)
    A conservative inventory valuation approach that is an attempt to anticipate declines in the value of inventory before its actual sale.
  29. Inventory turnover ratio
    A measure of the number of times inventory is sold during the period.
  30. Number of days' sales in inventory
    A measure of how long it takes to sell inventory
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davecowman
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Accounting 101 Chapter 5 Inventories and Cost of Goods Sold
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Inventories and Cost of Goods Sold
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