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Accounting 6th Ed Ch 5

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Updated 2007-03-01 22:10

Definition

TermDefinition
Periodic Inventory SystemBusiness does not keep an continuous record of inventory on hand. Physical count is don at the end of the period and is used for the financial statements.
Perpetual Inventory SystemBusiness keeps a running record of inventory and cost of good sold.
InvoiceA seller's request for cash from the purchaser
Sales RevenueThe amount that a merchandiser earns from selling its inventory
Cost of Goods SoldThe cost of the inventory that the business has sold to customers
Sales Returns and AllowancesDecrease in the seller's recievable from a customer's return of merchandise or from granting the customer an allowance.
Sales DiscountAn incentive for the customer to pay early
Net Sales RevenueSales revenue less sales discounts, sales returns, and allowances.
Gross ProfitExcess of net sales revenue over cost of goods sold.
Operating ExpensesExpenses other than the cost of goods sold. Rent, depreciation, salaries, wages, utilities, and supplies expense.
Operating IncomeGross profit minus operating expenses
Other RevenueRevenue outside the main operations of business (ie a gain on the sale of plant assets)
Other ExpenseExpense that is outside the main operations of business (ie a loss on the sale of a plant asset)
Multi-Step Income StatementContains subtotals to highlight certain relationships. Reports gross profit and operating income.
Single-Step Income StatementGroups all revenues together and lists and deducts all expenses together without drawing any subtotals.
Inventory TurnoverRatio of cost of goods sold to average inventory. Measures the number of times a company sells its average level of inventory a year.
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