Accounting 1: Chapter 6

  1. Average-Cost Method
    inventory costing method that uses the weighted average unit cost to allocate to ending inventory and cost of goods sold the cost of goods available for sale
  2. Conservatism
    concept that dictates that when in doubt, choose the method that will be least likely to overstate assets and net income
  3. Consigned Goods
    goods held for sale by one party (the consignee) although ownership of the goods is retained by another party (the consignor)
  4. Consistency Principle
    dictates that a company use the same accounting principles and methods from year to year
  5. Current Replacement Cost
    the current cost to replace an inventory item
  6. Days In Inventory
    measure of the average number of days inventory is held; calculated as 365 divided by inventory turnover ratio
  7. Finished Goods Inventory
    manufactured items that are completed and ready for sale
  8. First-In, First-Out (FIFO) method
    inventory costing method that assumes that the costs of the earliest goods purchased are the first to be recognized as cost of goods sold
  9. FOB (free on board) Destination
    freight terms indicating that ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller
  10. FOB (free on board) Shipping Point
    freight terms indicating that ownership of the goods remains with the seller until the goods reach the buyer
  11. Inventory Turnover Ratio
    a ratio that measures the number of times on average the inventory sold during the period; computed by dividing cost of goods sold by the average inventory during the period
  12. Just-In-Time (JIT) Inventory Method
    inventory system in which companies manufacture or purchase goods just in time for use
  13. Last-In, First-Out (LIFO) Method
    inventory costing method that assumes the costs of the latest units purchased are the first to be alloacted to cost of goods sold
  14. Lower-of-Cost-or-Market (LCM) Basis
    a basis whereby inventory is stated at the lower of either its cost or its market value as determined by current replacement cost
  15. Raw Materials
    basic goods that will be used in production but have not yet been placed into production
  16. Specific Identification Method
    an actual physical flow costing method in which items still in inveotry are specifically costed to arrive at the total cost of the ending inventory
  17. Weighted Average Unit Cost
    average cost that is weighted by the number of units purchased at each unit cost
  18. Work In Process
    that portion of manufactured inventory that has been placed into the production process but is not yet complete
Card Set
Accounting 1: Chapter 6
Accounting 1: Chapter 6