Create an account
the inventory of a maufacterer before the addition of any direct labor or manufactoring overhead
sales returns and allowances
contra revenue account used to record refunds to customers and reductions of their accounts
a conta revenue account used to record discounts given to customers for early payment of their account
a system in which the inventory account is increased at the time of each purchase and decreased at the time of each sale
transportation - in
an adjunction account used to record freight costs paid by the buyer aka freight - in
purchase returns and allowances
a contra purchase account used in a periodic inventry system when a refund is received from a supplier or a reduction is given in the balance owed to a supplier
a contra - purchases account used to record reductions in purchase price for early payment to a supplier
FOB destination point
The seller pays the freight costs and keeps ownership of goods until they reach the buyer.
FOB shipping point
Ownership passes to buyer as goods get on the truck at the seller's dock, so the BUYER owns the good during transit and must pay for shipping costs.
specific identification method
an inventory costing method that relies on matching unit costs with the actual units sold
weighted average cost method
an inventory costing method that assigns the same unit cost to all units available for sale during the period
the result of selling more units than purchased during the period, which can have negative tax consequences if a company is using LIFO
LIFO conformity rule
the IRS requirement that when LIFO is used on a tax return, it must also be used in reporting income to stockholders
the excess of the value of a company's inventory stated at FIFO over the value stated at LIFO
the portion of the gross profit that results from holding inventory during a period of rising prices
lower-of-cost-or-market LCM rule
a conservative inventory valuation approach that is an attempt to anticipate declines in the value of inventory before its actual sale
inventory turnover ratio
cost of goods sold divided by average inventory. It's a measure of how fast an entity turns its inventory.
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