Acc 200 Test 2

  1. What are Sales Revenue?
    Revenues resulting from a company's product sales to customers. Revenues from the rendering of services to customers may also be referred to as "sales revenues" or "service fee revenues." Sales revenues may also be identified as either cash sales or credit sales based on whether the sales price is paid in cash at the point of sale or the sale is made on account.
  2. What is a contra-revenue account?
    A nominal account appearing as a reduction of gross sales revenues in a company's income statement. Gross sales revenues, less any contra-revenues such as sales discounts and sales returns and allowances, equals net sales revenues.
  3. What are Sales Discounts?
    Any reduction in the established sales price of a product or service, including any cash discounts provided to customers. Sales discounts are commonly accounted for through use of a contra-revenue account which is reflected on a company's income statement as on offset to or reduction of gross sales revenues.
  4. What is a cash discount?
    A reduction in a product or service's sale price to cash-paying customers provided as part of a management strategy to increase sales, avoid the risks and costs of receivable collection and/or improve a company's immediate liquidity. Cash discounts also refer to price reductions for credit customers making payments within a specified discount period. For example, a discount offer noted by "2/10, n/30" means a credit customer may take a 2% discount on any cash payment made on the account within 10 days of the date of sale. However, if any portion of the price is not paid within that 10-day discount period, then that portion must be paid within 30 days with no discount. Cash discounts provided to a company's customers might alternatively be referred to as "sales discounts" and are accounted for on a company's books through the use of a contra-revenue account (sales discounts). From the customer's perspective, a cash discount may be referred to as a "purchase discount." Under a perpetual inventory accounting system any such discount is accounted for as a direct reduction in the cost of the inventory purchased.
  5. What is Merchandise Return?
    Previously sold merchandise that is returned by a customer for a cash refund or credit on account.
  6. What is Sales Return?
    The amount of any full or partial cash refunds or credits to customer accounts receivable given by a company to customers returning previously purchased merchandise. Companies deal with merchandise returns from customers in a variety of ways based on their marketing strategies. Some companies accept customer returns with no questions asked regardless of the condition of the returned merchandise. Others may refuse to accept any returns after a sale has been made. Regardless of the condition of merchandise returns, the amount of the customer refund or the credit given on the customer's account is accounted for in a contra-revenue account referred to as sales returns and allowances. This account offsets the amount of originally recorded sales revenue on a company's income statement.
  7. What are Gross Sales Revenues?
    Refers to the amount of a company's total sales revenues before any contra-revenue amounts (sales discounts, sales returns and allowances) are deducted.
  8. What are Net Sales Revenue?
    The amount of gross sales revenues less any sales discounts and sales returns and allowances.
  9. What is costs of good sold?
    An expense account sometimes referred to simply as "cost of sales." Cost of goods sold reflects the cost of any products sold to customers. A company's product costs are first accounted for as assets (inventory) until the products are actually sold and become an expense of the business (cost of goods sold). In a merchandising business, a product's cost is its purchase price and any freight or other costs associated with actually obtaining the product from a supplier or vendor. In a manufacturing business, a product's cost includes any direct material, direct labor and manufacturing overhead costs incurred in making the product.
  10. What is Gross Margin?
    Also referred to as "gross profit" or a company's overall "markup" or "margin." Gross margin is equal to the amount of a company's net sales revenues less cost of goods sold for a period of time. A company's gross margin does not equal its net income because other operating expenses, other revenues and expenses and income taxes must also be taken into account in the determination of net income.
  11. What is Mark Up?
    A product's markup is also referred to as the product's "gross margin" or "gross profit," and is the amount added to the cost of a product in establishing its sales price to customers. The amount of a product markup is often expressed as a percentage of the product's cost. For example, if a product which cost $50 is marked up to $75 for sale, the $25 markup is also referred to a 50% markup on cost (25/50 = 50%). To "keystone'" a product means to sell it at a 100% markup or at a price double its cost. This percentage markup is often confused with a product's gross margin percentage, which is the markup as a percentage of sales price rather than cost.
  12. What is Percentage Mark Up?
    An expression of a product's markup relative to its cost. For example, if a product which cost $50 is marked up to $75 for sale, the percentage markup is 50% (25/50 = 50%). To "keystone'" a product means to sell it at a 100% markup or at a price double its cost. A company's average percentage markup on the cost of all products sold can be determined by dividing the company's total gross margin by the amount of total cost of goods sold.
Card Set
Acc 200 Test 2
Accounting Vocabulary