Accounting Terms - Chapter 4

Front 1

Account form

Back 1

The form of balance sheet presented with assets on the left-hand side and the liabilities and stockholders' equity on the right-hand side.

Front 2

Administrative expenses

Back 2

Expenses incurred in the administration or general operations of the business, sometimes called general expenses.

Front 3

Cost of merchandise purchased

Back 3

The cost of merchandise purchased during a period, computed as purchases less purchases returns and allowances, less purchase discountss, plus freight in.

Front 4

Cost of merchandise sold

Back 4

The cost that is reported as an expense when merchandise or a manufactured product is sold

Front 5

Credit memorandum

Back 5

A form used by a seller to inform the buyer of the amount the seller proposes to decrease the account receivable due from the buyer.

Front 6

Credit period

Back 6

The amount of time the buyer is allowed in which to pay the seller.

Front 7

Credit terms

Back 7

Terms for payment on account by the buyer to the seller.

Front 8

Debit memorandum

Back 8

A form used by a buyer to inform the seller of the amount the buyer proposes to decrease the account payable due the seller.

Front 9

FOB (free on board) destination

Back 9

Freight terms in which the seller pays the transportation costs from the shipping point to the final destination.

Front 10

FOB (free on board) shipping point

Back 10

Freight terms in which the buyer pays the transportation c osts fromt he shipping point to the final destination.

Front 11

Freight in

Back 11

Freight costs incurred in obtaining merchandise.

Front 12

General expenses

Back 12

Expenses incurred in the administration or general operations of the business, sometimes called administrative expenses.

Front 13

Gross profit

Back 13

Sales minus the cost of merchandise sold.

Front 14

Income from operations

Back 14

The excess of gross profit over total operating expenses. Sometimes called operating income.

Front 15

Indirect method

Back 15

A method of preparing the statement of cash flows that reconciles net income with net cash flows from operating activities.

Front 16

Inventory shortage

Back 16

The amount by which the merhandise for sale, as dindicated by the balance of the merchandise inventory account, is larger than the total amount of merchandise counted during the physical inventory. Sometimes called inventory shrinkage.

Front 17

Inventory shrinkage

Back 17

The amount by which the merchandise inventory account, is larger than the total amount of merchandise counted during the physical inventory. Sometimes called inventory shortage.

Front 18

Invoice

Back 18

The bill that the seller sends to the buyer.

Front 19

Merchandise available for sale

Back 19

the cost of merchandise available for sale to customers.

Front 20

Merchandise inventory

Back 20

Merchandise on hand (not sold) at the end of an accounting period.

Front 21

Multiple-step income statement

Back 21

A form of income statement that contains several sections, subsections, and subtotals.

Front 22

Net sales

Back 22

Gross sales less sales returns and allowances and sales discounts.

Front 23

Operating income

Back 23

The excess of gross profit over total operation expenses. Sometimes called income from operations.

Front 24

Other expense

Back 24

Expenses that cannot be traced directly to operations.

Front 25

Periodic inventory system

Back 25

The inventory method in which the inventory records do not show the amount available for sale or sold during the period.

Front 26

Perpetual inventory system

Back 26

The inventory system in which each purchase and sale of merchandise is recorded in an inventory account.

Front 27

Purchases discounts

Back 27

Discounts taken by the buyer for early payment of an invoice.

Front 28

Purchases returns and allowance

Back 28

From the buyer's perspective, returned merchandise or an adjustment for defective merchandise.

Front 29

Report form

Back 29

The form of blanche sheet in which assets, liabilities, and stockholders' equity are reported in a downward sequence.

Front 30

Sales

Back 30

The total amount charged to customers for merchandise sold, including cash sales and sales on account.

Front 31

Sales discounts

Back 31

From the seller's perspective, discounts that a seller can offer the buyer for early payment.

Front 32

Sales returns and allowances

Back 32

From the seller's perspective, returned merchandise or an adjustment for damaged or defective merchandise.

Front 33

Selling expenses

Back 33

Expenses that are incurred directly in the selling of merchandise.

Front 34

Single-step income statement

Back 34

A form of income statement in which the total of all expenses is deducted from the total of all revenues.