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13 Cards in this Set
- Front
- Back
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Consistency principle
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a business should use the same accounting methods and procedures from period to period
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disclosure principle
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a business's financial statements must report enough information for outsiders to make knowledgeable decisions about the company
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Materiality concept
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and they must perform strictly proper accounting only for items that are significant to the business's financial situation
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Conservatism
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the business should report the least favorable figures in the financial statements when two or more possible outcomes are presented
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Inventory costing method
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method of approximating the flow of inventory costs in a business that is used to determine the amount of cost of goods sold and ending merchandise inventory
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specific identification method
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an inventory costing method based on the specific cost of particular units of inventory
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First in, first out (FIFO) method
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An inventory costing method in which the first costs into inventory are the first cost out to cost of goods sold. ending inventory is based on the costs of the most recent purchases
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Cost of goods available for sale
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the total cost spent on inventory that was available to be sold during a period.
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Last in, first out (LIFO) method
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An inventory costing method in which the last costs into inventory are the first cost out to cost of goods sold. The method leaves the oldest costs- those of the beginning inventory in the earliest purchases of the period- in ending inventory
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Weight average method
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an inventory costing method based on the weight average cost per unit of inventory that is calculated after each purchase. Weighted average cost per unit is determined by dividing the cost of goods available for Sale by the number of units available
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Lower of cost or market (LCM)
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rule that merchandise inventory should be reported in the financial statements of whichever is lower- Its historical cost or its market value
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Inventory turnover
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measures the number of times a company sells its average level of merchandise inventory during a period. Cost of goods sold divided by average merchandise inventory
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Days' sales in inventory
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measures the average number of days that inventory is held by a company. 365 days divided by inventory turnover
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