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22 Cards in this Set
- Front
- Back
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Inventory
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Consists of all goods owned and held for sale in the regular course of business. It is also considered a current asset because a company normally sells it within a year or within its operating cycle.
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Inventory Turnover
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The average number of times a company sells its inventory during an accounting period. Computed by dividing cost of goods sold by average inventory.
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Days' Inventory On Hand
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The average number of days it takes a company to sell the inventory it has in stock.
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Supply-Chain Management
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Helps reduce levels of inventory. A company uses the Internet to order and track goods that it needs immediately.
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Just-In-Time Operating Environment
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Goods arrive just at the time they are needed.
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Gross Margin
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The difference between net sales and cost of goods sold and that cost of goods sold depends on the portion of cost of goods available for sale assigned to ending inventory.
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Inventory Cost
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Includes invoice price less purchases discounts, Freight-in, including insurance in transit, and applicable taxes and tariffs
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Goods flow
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Refers to the actual physical movement of goods in the operations of a company. An assumption used in the valuation of inventory
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Cost flow
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Refers to the association of costs with their assumed flow in the operations of a company.
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Consignment
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Merchandise that its owner places on the premises of another company with the understanding that payment is expected only when the merchandise is sold and that unsold items may be returned to the _____________.
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Market
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The amount that a merchandising company would pay at the present time for the same goods, purchased from the usual suppliers and in the usual quantities .
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Lower-of-Cost-or-Market (LCM) rule
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Requires that the inventory be written down to the lower value and that a loss be recorded when the replacement cost of inventory falls below its historical cost (as determined by an inventory costing method.
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Full Disclosure Convention
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A note to the financial statements explaining inventory policies.
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Conservatism Convention
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Application of the LCM rule
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Consistency Convention
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Choosing a method and sticking with it.
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Specific Identification Method
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Identifies the cost of each item in ending inventory. It can be used only when it is possible to identify the units in ending inventory as coming from specific purchases.
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Average-Cost Method
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Inventory is priced at the average cost of the goods available for sale during the accounting period. Computed by dividing the total cost of goods available for sale by the total units available for sale. In periods of decreasing prices, this method results in neither the highest inventory cost nor the lowest income.
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First-In, First-Out (FIFO) Method
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Assumes that the costs of the first items acquired should be assigned to the first items sold. The costs of the goods on hand at the end of a period are assumed to be from the most recent purchases, and the costs assigned to goods that have been sold are assumed to be from the earliest purchases. In periods of rising prices, this results in the highest cost of goods sold, and lowest ending inventory cost.
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Last-In, First-Out (LIFO) Method
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Assumes that the costs of the last items purchased should be assigned to the first items sold and that the cost of ending inventory should reflect the cost of the goods purchased earliest. In periods of rising prices, this results in the highest income. In periods of decreasing prices, this method results in the lowest income, and the highest cost of goods sold.
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LIFO liquidation
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When sales have reduced inventories below the levels set in prior years, it is called a ___________ -Units sold exceed units purchased for the period.
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Retail Method
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Estimates the cost of ending inventory by using the ration of cost to retail price.
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Gross-profit Method
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Assumes that the ratio of gross margin for a business remains relatively stable from year to year.
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