Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

16 Cards in this Set

  • Front
  • Back
Gross profit
Net sales – Cost of Goods Sold
is the full cost of buying merchandise for resale.
Purchase allowance
is a reduction in purchase price because the item has a defect or was the wrong item ordered.
Purchase discount
is a reduction in the initial cost of the merchandise. Usually, it is due to early payment of the debt.
is the shipping cost paid by the buyer for merchandise. Note that this freight payment increases the cost of the merchandise. It is not an expense
Cost of Merchandise
is the cost of the merchandise sold to customer. It is usually figured out by Subtracting the sales and allowances and sales discount from purchase then adding the transportation in (increase the Merchandise Inventory)
Net sales
is determined by subtracting sales returns and allowances and sales discounts from sales
Single step
Groups all expenses in major categories
Subtracts total expenses from Net sales
Isolates Cost of Goods Sold
Subtracts CGS from Net sales to get Gross Profit
FOB Destination
seller pays freight costs and debits Transportation out (expense)
FOB shipping
buyer pays freight costs and debits Merchandise Inv.
Dual nature
Each transaction affects
Recorded inventory does not equal physical inventory
Requires correction
Selling Expense
expenses that are incurred directly in the selling of the merchandise
they include such expenses as salespersons' salaries, store supplies used, depreciation of store equipment, and advertising
Administrative expenses
expenses incurred in the administration or general operations of the business. also known as general expenses.
they include office salaries, depreciation of office equipment, and office supplies used.
2/10, n/30 or n/eom
means2% discount if paid within 10 days, net amount due within 30 days or at the end of the month.