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72 Cards in this Set
- Front
- Back
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administrative expenses
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expenses relating to general operating activities such as personnel management, accounting, and store security
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contra-revenue account
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an account that is offset against a revenue account on the income statement (normal debit balance)
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cost of goods sold
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the total cost of merchandise sold during the period
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FOB destination
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seller pays the freight
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FOB shipping point
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buyer pays the freight
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gross profit
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excess of net sales over the COGS
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gross profit rate
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dividing amount of gross profit by net sales (percentage)
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income from operations
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income from a company's principal operating activity, subtract COGS and operating expenses from net sales
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multi-step income statement
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an income statement that shows several steps in determining net income
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net sales
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sales-SR&A and sales discounts
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nonoperating activities
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various revenues, expenses, gains, and losses that are unrelated to a company's main line of operations
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operating expenses
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expenses incurred in the process of earning sales and revenues
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other expenses and losses
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a nonoperating-activities section of the income statement that shows expenses from auxiliary operations and losses unrelated to the company's operations
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other revenues and gains
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a nonoperating-activities section of the income statement that shows revenues from auxiliary operations and gains unrelated to the company's operations
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periodic inventory system
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company doesn't keep detailed inventory records and determines COGS only at the end of accounting period
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perpetual inventory system
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company keeps detailed records of cost of each inventory purchase and sale and the records continuously show the inventory that should be on hand
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purchase allowance
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a deduction made to the selling price of merchandise granted by the seller
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purchase discount
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a cash discount claimed by a buyer for prompt payment of a balance due
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purchase/sale invoice
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a document that supports each credit purches/sale
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purchase return
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a return of goods from the buyer to the seller for a cash or credit refund
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sales discount
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a reduction given by a seller for prompt payment of a credit sale
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sales returns and allowances
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purchase returns and allowances from the seller's perspective
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sales revenue
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primary source of revenue in a merchandising company
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selling expenses
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expenses associated with making sales
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single-step income statement
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only one step in determing net income
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average cost method
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inventory costing method that uses the weighted average unit cost to allocate to ending inventory and cost of goods sold the cost of goods available for sale
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conservatism
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choose method least likely to overstate assets
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consigned goods
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goods held for sale by one party although ownership of the goods is retained by another party
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consistency principal
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company uses same accounting methods and principles from year to year
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current replacement cost
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current cost to replace an inventory item
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days in inventory
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365/inventory ratio
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inventory turnover ratio
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measures the number of times on average the inventory sold during the period; COGS/avg inventory
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lower-of-cost-or-market
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a basis whereby inventory is stated at the lower of either its cost or its market value as determined by current replacement cost
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specific identification method
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an actual phsycial flow costing method in which items still in inventory are specifically costed to arrive at the total cost of the ending inventory
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weighted-average unit cost
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average cost that is weighted by the numbers of units purchsed at each unit cost
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comparability
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ability to compare accounting info of different companies because they use same accounting principle
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conceptual framework
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coherent system of interrelated objectives and fundamentals that can lead to consistent standards
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cost principle
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accounting principle: assets recorded at cost
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current ratio
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current assets/current liabilities
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debt to total assets
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solvency measure that indicates the percentage of total assets provided by creditors; total liabilities/ total assets
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earnings per share
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net income earned by each share of outstanding common stock
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economic entity assumption
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accounting assumption: economic events can be identified with a particular unit of accountability
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elements of financial statements
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definitions of basic terms used in accounting
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full disclosure principle
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accounting principle: circumstances/events that make a difference to statement users should be disclosed
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GAAP
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a set of rules and practices, having substantial authoritative support, that are recognized as a general guide for financial reporting purposes
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going concern assumption
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accounting assumption: enterprise will continue in operation long enough to carry out its existing objectives and commitments
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international accounting standards board
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organization whose purpose is to formulate and publish international accounting standards and to promote their acceptance worldwide
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matching principle
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accounting principle: expenses matched with revenues in the period when efforts are expended to generate revenues
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materiality
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important to reasonably prudent investor/creditor
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monetary unit assumption
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accounting assumption: only transaction data capable of being expressed in monetary terms should be included in accounting records
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profit margin percentage
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profitability measure that indicates the percentage of each dollar of sales that results in net income; net income/net sales
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relevance
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QUALITY: information makes a difference in a decision
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reliability
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QUALITY: information that gives assurance that it is free of error and bias
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return on assets
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overall measure of a company's profitability
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return on equity
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profitability measure that shows the rate of net income earned for each dollar of owner's investment
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revenue recognition principle
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accounting principle: revenue should be recognized in the period in which it was earned
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time period assumption
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accounting assumption: economic life of business can be divided into artificial time periods
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working capital
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the excess of current assets over current liabilities
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bonding
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obtaining insurance protection against misappropriation of assets by employees
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cash
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resources: coins, currency, checks, money orders, money on hand, deposit in bank, or similar depository
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cash equivalents
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short-term, highly liquid investments that can be converted to a specific amount of cash
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compensating balances
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minimum cash balances required by a bank in support of bank loans
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deposits in transit
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deposits recorded by the depositor but not yet been recorded by the bank
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internal auditors
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company employees who continuously evaluate the effectiveness of the company's internal control system
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internal control
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all of the related methods and measures adopted withing an organization to safeguard its assets and enhance the accuracy and reliability of its accounting records
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NFS check
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a check that is not paid by a bank because of insufficient funds in a customer's bank account
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outstanding checks
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checks issued and recorded by a company but not yet paid by the bank
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petty cash fund
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a cash fund used to pay relatively small amounts
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restricted cash
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cash that must be used for a special purpose
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sarbanes-oxely act
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regulations passed by congress in 2002 to try to reduce unethical coporate behavior
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voucher
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an authorization form prepared for each payment in a voucher system
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voucher system
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a network of apporvals by authorized individuals acting independently to ensure that all disbursements by check are proper
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