Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
19 Cards in this Set
- Front
- Back
|
Average-cost method
|
A method of valuing all units in inventory at the same average per-unit cost, which is recomputed after every purchase.
|
|
|
Consistency (inventory valuation)
|
An accounting principle that calls for the use of the same method of inventory pricing from year to year, with full disclosure of the effects of any change in method.
|
|
|
cost flow assumption
|
Assumption as to the sequence in which units are removed from inventory for the purpose of sale. Not required to parallel the physical movement of merchandise if the units are homogeneous.
|
|
|
cost layer
|
Units of merchandise acquired at the same unit cost. An inventory comprised of this is characteristic of all inventory valuation methods except average cost.
|
|
|
cost ratio
|
The cost of merchandise expressed as a percentage of its retail selling price. Used in inventory estimating techniques, such as the gross profit method and the retail method.
|
|
|
first-in, first-out (FIFO) method
|
A method of computing the cost of inventory and the COGS based on the assumption that the first merchandise acquired is the first merchandise sold and the ending inventory consists of the most recently acquired goods.
|
|
|
F.O.B destination
|
A term meaning the seller bears the cost of shipping goods to the buyer's location. Title to the goods remains with the seller while the goods are in transit.
|
|
|
F.O.B shipping pt.
|
The buyer of goods bears the cost of transportation from the seller's location to the buyer's location. Title to the goods passes at the pt. of shipment, and the goods are the property of the buyer while in transit.
|
|
|
gross profit method
|
A method of estimating the cost of the ending inventory based on the assumption that the rate of gross profit remains approximately the same from year to year.
|
|
|
inventory turnover
|
COGS/average inventory indicates how many time the average inventory is sold during the course of the year.
|
|
|
Just-in-Time (JIT) inventory system
|
A technique designed to minimize a company's investment in inventory. In a manufacturing company, receiving purchases of raw materials just in time for use in the process and completing the finished goods just in time to file sales order.
|
|
|
last-in, first-out (LIFO) method
|
A method of computing the COGS by use of the prices paid for the most recently acquired units. Ending inventory is valued on the basis of prices paid for the units first acquired.
|
|
|
Lower-of-cost-or-market (LCM) rule
|
A method of inventory pricing in which goods are valued at original cost or replacement cost (market), whichever lower.
|
|
|
Moving average method
|
A method of valuing all units of inventory at the same average per-unit cost, recalculating this cost after each purchase. This method is used in a perpetual inventory system
|
|
|
Physical inventory
|
A systematic count of all goods on hand, followed by the application of unit prices the quantities counted and development of a dollar valuation of the ending inventory.
|
|
|
retail method
|
A method of estimating the COGS and ending inventory. Similar to GP method, except that the cost ratio is based on current cost-to-retail prices relationships rather than on those of the prior year.
|
|
|
shrinkage losses
|
Losses of inventory resulting from theft, spoilage, or breakage
|
|
|
specific identification
|
Recording as the cost of goods sold the actual costs of the specific units sold. Necessary if each unit in inventory is unique, but not if the inventory consists of homogeneous products.
|
|
|
write-down (of an asset)
|
A reduction in the carrying amount of an asset b/c it has become obsolete or its usefulness has otherwise been impaired. Involves a credit to the appropriate asset account, with an offsetting debit to a loss account.
|
