Accounting principle requiring that when there is a choice, accountants choose the safer or more conservative method that is least likely to result in an overstatement of income or assets.
Accounting principle requiring a business to apply the same accounting methods in the same way from one period to the next.
First-In, First-Out Method (FIFO)
An inventory costing method that assumes that the first items purchased (first in) were the first items sold (first out).
Last-In, First-Out Method (LIFO)
An inventory costing method that assumes that the last items purchased (last in) are the first items sold (first sold).
The requirement that ending merchandise inventory be stated at the lesser of cost (calculated using one of the four inventory costing methods) or market value.
The current price that is charged for a similar item of merchandise in the market.
The link of a terminal or cash register to a centralized computer system.
Periodic Inventory System
An inventory system which requires a physical count of the merchandise on hand to update inventory records.
Perpetual Inventory System
An inventory system that keeps a constant, up-to-date record of the amount of merchandise on hand.
Point-of-Sale Terminal (POS)
An electronic cash register.
Specific Identification Method
An inventory costing method in which the exact cost of each item in inventory is determined and assigned; used most often by businesses that have a low unit volume of merchandise with high unit prices.
Weighted Average Cost Method
An inventory costing method in which all purchases of an item are added to the beginning inventory of that item; the total cost is then divided by the total units to obtain the average cost per unit.