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.
Freight terms indicating that the seller places the goods free on board to the buyer's place of business, and the seller pays the freight.
FOB shipping point
Freight terms indicating that the seller places goods free on board the carrier, and the buyer pays the freight costs.
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.
Income from operations
Income from a company's principal operating activity; determined by subtracting cost of goods sold and operating expenses from net sales.
Multiple-step income statement
An income statement that shows several steps in determining net income.
Sales less sales returns and allowances and less sales discounts.
Various revenues, expenses, gains, and losses that are unrelated to a company's main line of operations.
Expenses incurred in the process of earning sales revenues.
Other expenses and losses
A nonoperating-activities section of the income statement that shows expenses and losses unrelated to the company's main line of operations.
Other revenues and gains
A nonoperating-activities section of the income statement that shows revenues and gains unrelated to the company's main line of operations.
Periodic inventory system
An inventory system under which the company does not keep detailed inventory records throughout the accounting period but determines the cost of goods sold only at the end of an accounting period.
Perpetual inventory system
An inventory system under which the company keeps detailed records of the cost of each inventory purchase and sale and the records continuously show the inventory that should be on hand.
A deduction made to the selling price of merchandise, granted by the seller so that the buyer will keep the merchandise.
A cash discount claimed by a buyer for prompt payment of a balance due.
A document that supports each credit purchase.
A return of goods from the buyer to the seller for a cash or credit refund.
A reduction given by a seller for prompt payment of a credit sale.
A document that supports each credit sale.
Sales returns and allowances
Purchase returns and allowances from the seller's perspective. See Purchase return and Purchase allowance, above.
Sales revenue (Sales)
The primary source of revenue in a merchandising company.
Single-step income statement
An income statement that shows only one step in determining net income.