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Unit 3: Accounting for Special Procedures

Last-in, first-out inventory costing method (LIFO)

using the price of merchandise purchased last to calculate the cost of merchandise sold first.

Lower of cost or market inventory costing method

using the lower of cost or market price to calculate the cost of merchandise inventory

Maturity date of a note

the date a note is due

Maturity value

the amount that is due on the maturity date of a note

Merchandise inventory turnover ratio

the number of times the average amount of merchandise inventory is sold during a specific period of time

Modified accelerated cost recovery system

depreciation method required by the Internal Revenue Service to be used for income tax calcualtion purposes for most plant assets placed in service after 1986

Net 30

a form of trade credit which specifies payment is expected to be received in full 30 days after the goods are delivered

Notes payable

promissory notes that a business issues to creditors

Notes receivable

promissory notes that a business accepts from customers

Periodic inventory

a merchandise inventory determined by counting, weighing, or measuring items of merchandise on hand

Perpetual inventory

a merchandise inventory determined by keeping a continuous record of increases, decreases, and balance on hand

Personal property

all property not classified as real property

Plant assest record

an accounting form on which a business records information about each plant assest

Prepaid expenses

expenses paid in one fiscal period but not reported as expenses until a later fiscal period

Prinicipal of a note

the original amount of a note

Producation unit method of depreciation

method in which depreciation is computed on the basis of an asset's actual use, instead of the time in service, to match depreciation expense with the revenue generated


unit method of depreciation-calculating estimated annual depreciation expenses based on the amount of production expected from a plant assest

Promissory note

a written and signed promise to pay a sum of money at a specified time

Purchase order

a completed form authorizing a seller to deliver goods with payment to be made later

Real property

land and anything attached to the land

Retail method of estimating inventory

estimating inventory by using a percentage based on both cost and retail prices

Reversing entry

an entry made at teh beginning of oen fiscal period to reverse and adjusting entry made in the previous fiscal period


the amount or percentage of profit lost to shoplifing, employee theft, and paperwork error


material or the amount of material that is spoiled or wasted

Stock ledger

a file of stock records for all merchandise on hand

Stock record

a form used to show the kind of merchandise, quantity received, quantity sold, and balance on hand

Straight line method of depreciation

charging an equal amount of depreciation expense for a plant assest in each year of useful life

Sum-of-the-years' digit method of depreciation

using fractions based on years of a plant asset's useful life

Uncollectible accounts

accounts receivable that cannot be collected

Unearned revenue

revenue received in one fiscal period but not earned until the next fiscal period

Weight-average inventory costing method

using the average cost of beginning inventory plus merchandise purchased during a fiscal period to calculate the cost of merchandise sold

Writing off an account

canceling the balance of a customer account because the customer does not pay

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