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17 Cards in this Set
- Front
- Back
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Average cost method
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Inventory costing method where, after each purchase of inventory, a new weighted average cost per unit is computed and is used to value ending inventory and cost of goods sold.
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Conservatism
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Accounting principle that states that a business must report all items in the financial statements at amounts that lead to the most cautious immediate results.
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Consistency
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Accounting principle that states that a business should use the same accounting methods and procedures from period to period.
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Cost of goods available for sale
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The cost of inventory on hand at the beginning of the period plus the net cost of inventory purchased during the period.
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Finished goods
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Inventory of goods ready to sell.
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First-in, first-out (FIFO) method
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Inventory costing method in which the first inventory costs incurred are the first costs to be assigned to cost of goods sold; FIFO leaves in ending inventory the last, the most recent, costs incurred.
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Footnotes
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Disclosures that accompany the financial statements.
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Full disclosure
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Accounting principle that states that a company's financial statements should report enough information for users to make knowledgeable decisions about the company.
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Gross profit method
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A way of estimating inventory by estimating gross profit, using estimated gross profit to estimate cost of goods sold, and using estimated cost of goods sold to estimate ending inventory.
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Inventory shrinkage
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The loss of inventory.
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Last-in, first-out (LIFO) method
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Inventory costing method in which the last inventory costs incurred are the first costs to be assigned to cost of goods sold; LIFO leaves in ending inventory the first, the oldest, costs incurred.
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Lower-of-cost-or-market (LCM) rule
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Rule that a business must report inventory in the financial statements at whichever is lower, the historical cost or the market value, of each inventory item.
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Materiality
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Accounting principle that states that a company must perform strictly proper accounting only for items that are significant for the business's financial statements. Information is significant, or material, when its presentation in the financial statements would cause someone to change a decision.
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Raw materials
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Inventory items used in the production of goods.
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Specific-identification method
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Inventory costing method in which a business uses the specific cost of each unit of inventory; also called the specific-unit-cost method.
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Specific-unit-cost method
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Inventory costing method in which a business uses the specific cost of each unit of inventory; also called the specific-identification method.
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Work in process
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Inventory of partially completed goods.
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