Chp5 Vocabulary (financial accounting)
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Created by:
jbarrera117 on March 1, 2011
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17 terms
Terms | Definitions |
|---|---|
 Contra revenue account | An account that is offset against a revenue account on the income statement |
| Cost of goods sold | The total cost of merchandise sold during the period. |
| Gross profit | The excess of net sales over the cost of goods sold. |
| Gross profit rate | Gross profit expressed as a percentage by dividing the amount of gross profit by net sales. |
| Net sales | Sales less sales returns and allowances and sales discounts. |
| Periodic inventory system | An inventory system in which a company does not maintain detailed records of goods on hand and determines the cost of goods sold only at the end of an accounting period. |
| Perpetual inventory system | A detailed inventory system in which a company maintains the cost of each inventory item and the records continuously show the inventory that should be on hand. |
| Profit margin ratio | Measures the percentage of each dollar of sales that results in net income, computed by dividing net income by net sales. |
| Purchase allowance | A deduction made to the selling price of merchandise, granted by the seller so that the buyer will keep the merchandise. |
| Purchase discount | A cash discount claimed by a buyer for prompt payment of a balance due. |
| Purchase invoice | A document that supports each purchase. |
| Purchase return | A return of goods from the buyer to the seller for cash or credit. |
| Quality of earnings ratio | A measure used to indicate the extent to which a company's earnings provide a full and transparent depiction of its performance; computed as net cash provided by operating activities divided by net income. |
| Sales discount | A reduction given by a seller for prompt payment of a credit sale. |
| Sales invoice | A document that provides support for each sale. |
| Sales returns and allowances | Transactions in which the seller either accepts goods back from the purchaser (a return) or grants a reduction in the purchase price (an allowance) so that the buyer will keep the goods. |
| Sales revenue | Primary source of revenue in a merchandising company. |
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