expressed as a percentage by dividing the amount of gross profit by net sales
Perpetual inventory system
A detailed inventory system in which a company maintains the cost of each inventory item and the records continuously show the inventory that should be on hand.
Periodic inventory system
An inventory system in which a company does not maintain detailed records of goods on hand and determines the cost of goods sold only at the end of an accounting period.
Sales returns and allowances
Transactions in which the seller either accepts goods back from the purchaser (a return) or grants a reduction in the purchase prices (an allowance) so that the buyer will keep the goods.
Quality of earnings ratio
A mearure used to indicate the extent to which a company's earnings provide a full and transparent depiction of its performance; computed as net cash provided by operating activities divided by net income.
Contra revenue account
An account that is offset against a revenue account on the income statement.
Purchase allowance
A deduction made to the selling price of merchandise, granted by the seller so that the buyer will keep the merchandise
Gross profit
The excess of net sales over the cost of goods sold
Sales revenue
Primary source of revenue in a merchandising company.
Sales discount
A reduction given by a seller for prompt payment of a credit sales.
Purchase invoice
A document that supports each purchase.
Net sales
Sales less sales returns and allowances and sales discounts.
Sales invoice
A document that provides support for eash sale.
Cost of goods sold
The total cost of merchandise sold during the period.
Purchase return
A return of goods from the buyer to the seller for cash or credit.
Profit margin ratio
Measures the percentage of each dollar of sales that results in net income, computed by dividing net income by net sales.
Purchase discount
A cash discount claimed by a buyer for prompt payment of a balance due.