Term
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Definition
| finished goods that are held for sale to customers |
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Term
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Definition
| generate revenue by selling goods |
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Term
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Definition
| companies that sell goods to the final customer |
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Term
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Definition
| companies that sell to other businesses |
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Term
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Definition
| cost of using up inventory |
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Term
| selling and administrative costs |
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Definition
| costs that are not included in inventory |
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Term
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Definition
| costs recognized in the period they occur |
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Term
| cost of goods available for sale |
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Definition
| inventory purchased during period + beginning inventory balance |
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Term
| cost of goods sold (COGS) |
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Definition
| cost of inventory sold EXPENSED on the income statement |
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Term
| gross margin (or gross profit) |
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Definition
| different between sales revenue and cost of goods sold |
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Term
| perpetual inventory system |
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Definition
| each time merchandise is sold or puchased, the inventory account reflects it |
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Term
| purchasing inventory costs include: |
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Definition
| incurring transportation costs, returning inventory or receiving purchase allowances, taking cash discounts. |
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Term
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Definition
| company returns inventory. decrease assets(inventory) and decreases liabilities(accounts payable). there is no effect on either the income statement or statement of cash flows. |
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Term
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Definition
| customers decide to keep goods instead of retiring them if the seller offers to reduce the price. Affects the same way purchase return does |
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Term
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Definition
| 2% discount if purchaser pays within 10 days. If not the original amount is due 30 days from the date of purchase |
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Term
| when offering cash discounts, use.. |
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Definition
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Term
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Definition
| reduces cost of inventory and the associated account payable. does not directly affect the income statement or statement of cash flows |
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Term
| If goods are delivered FOB shipping point |
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Definition
| the buyer is responsible for the freight costs |
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Term
| if goods are delivered FOB destination |
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Definition
| the seller is responsible for the freight costs |
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Term
| when goods are sold the product cost... |
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Definition
| is transferred from the merchandise inventory account to the expense account(cost of goods sold) |
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Term
| the cost of freight on goods shipped are incurred... |
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Definition
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Term
| recognizing transportation expenses... |
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Definition
| reduce assets(cash) and stockholders equity (retained earnings) |
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Term
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Definition
| obtaining profit from transactions but not selling inventory (ex. selling an asset like land) |
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Term
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Definition
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Term
| gain/loss affect (ex. land) |
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Definition
| increase cash, decrease asset land, increase net income by difference between original price |
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Term
| groos margin - operating expenses= |
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Definition
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Term
| single step income statements |
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Definition
| single comparison of all revenues minus all expenses |
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Term
| multi step income statements |
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Definition
| show additional relationships such as gross margin and operating income |
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Term
| interest is reported as a.. |
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Definition
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Term
| gain on the sale of land is not listed in... |
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Definition
| the operating activities of the statement of cash flows |
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Term
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Definition
| loss of inventory that does not reflect sale to customers(ex. shoplifting, misplaced, damaged). merchandise inventory is reduced and expense for what was lost is recognized |
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Term
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Definition
| assets (inventory) down, stockholders equity( retained earnings) down |
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Term
| when recording 2/10 n/30 you first... |
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Definition
| record as if the customer takes the discount |
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Term
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Definition
| gross amount of sales - sales returns , allowance, and sales discounts |
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Term
| common size financial statements |
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Definition
| display information in percentages as well as absolute dollar amounts. Useful for massive companies to view statements |
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Term
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Definition
| designed to meet the needs of internal users |
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Term
| what type of costs are included in the merchandised inventory account? |
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Definition
| the cost of the product, transportation-in costs, packaging costs, transit insurance, etc. |
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Term
| what is the difference between a product cost and a selling and administrative cost? |
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Definition
| Product costs are costs associated with goods for resale, usually inventory costs. Selling and administrative expenses, called period costs, are costs that are not directly traceable to products, for example, operating expenses |
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Term
| how is the cost of goods available for sale determined? |
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Definition
| Cost of goods available for sale is the total of inventory on hand at the beginning of the period plus inventory purchased during the period |
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Term
| What portion of costs of goods available for sale is shown on balance sheet? on income statement? |
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Definition
| The cost of the items that have not been sold are allocated to merchandise inventory (asset) and are shown on the balance sheet. The cost of the items that have been sold are allocated to cost of goods sold (expense) and are shown on the income statement |
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Term
| when are period costs expensed? |
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Definition
| Period costs are expensed in the period they are incurred or used |
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Term
| when product costs expensed? |
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Definition
| Product costs are expensed in the period in which the inventory is sold |
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Term
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Definition
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Term
| Cost of Goods Available for Sale-Cost of Goods Sold= |
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Definition
| Ending Merchandise Inventory |
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Term
| effect of acquisition of cash from the issue of common stock |
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Definition
| Assets increase, stockholders’ equity increases |
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Term
| effect of contribution of inventory by an owner of a company |
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Definition
| Assets increase, stockholders’ equity increases - This is similar to an acquisition of cash capital from the owner except that inventory and not cash is increased. The balance sheet and statement of changes in stockholders’ equity are affected |
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Term
| effect of purchase of inventory with cash |
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Definition
| c. This is an asset exchange and total assets would not change. The balance sheet and statement of cash flows are affected |
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Term
| effect of sale of inventory for cash |
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Definition
| d. Assets both increase and decrease (cash increases, inventory decreases) and stockholders’ equity both increases and decreases (revenue is increased and cost of goods sold is increased). The balance sheet, income statement, statement of changes in stockholders’ equity, and statement of cash flows are affected |
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Term
| when goods are shipped FOB point, which party is responsible fro shipping costs? |
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Definition
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Term
| when goods are shipped FOB destination, which party is responsible fro shipping costs? |
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Definition
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Term
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Definition
| Transportation-in is the cost of freight and shipping charges on goods purchased. It is a product cost because it is a part of the cost of the goods purchased |
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Term
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Definition
| period cost and is added to the expense account |
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Term
| why would a seller grant allowance to a customer? |
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Definition
| When allowances are granted it is usually because the customer received inferior or damaged merchandise. When granting an allowance, the seller does not take back the goods and saves the cost of shipping and replacing the product. In addition, it saves time in handling the problem |
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Term
| what is the purpose of giving cash discounts? |
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Definition
| to encourage prompt payment |
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Term
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Definition
| increase in assets (inventory) to the seller as previously sold merchandise is returned. Stockholders’ equity is increased as cost of goods sold is reduced by the original cost of the goods, reduction of cash or accounts receivable |
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Term
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Definition
| designed to meet the needs of internal users |
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Term
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Definition
| management accountants are free to engage in any information as long as the transaction adds value in excess of its cost |
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Term
| financial accounting reports on and managerial reports on |
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Definition
| what happened yesterday, what is expected to happen tommorow |
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Term
| cost of making products include |
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Definition
| materials, labor, transportation. |
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Term
| managers do not recognize expense until |
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Definition
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Term
| when a table is sold, the avg cost of producing the table is transferred from the inventory account to.. |
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Definition
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Term
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Definition
| materials used to make products |
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Term
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Definition
| cost of materials that can be easily and conveniently traced to products |
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Term
| difference between salaries paid to selling and administrative workers to production wages |
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Definition
| production are added to inventory, selling and administrative are removed from retained earnings |
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Term
| depreciation of office furniture expressed in |
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Definition
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Term
| depreciation on manufacturing equipment expressed in |
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Definition
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Term
| all product costs are recognized as an expense in |
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Definition
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Term
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Definition
| cannot be traced to produsts in a cost-efficient manner |
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Term
| indirect costs incurred to make products are called |
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Definition
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Term
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Definition
| process of dividing into parts |
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Term
| cost of a product made by manufacturing is composed of |
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Definition
| direct materials, direct labor, manufacturing overhead |
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Term
| products provided by service industry are |
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Definition
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Term
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Definition
| make ready for consumer consumption to reduce inventory holding costs |
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Term
| cost of tickets to a theme park is an example of a |
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Definition
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Term
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Definition
| knowing how costs behave relative to the level of business activity |
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Term
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Definition
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Term
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Definition
| not fixed, changes with number of tickets sold |
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Term
| when sales volume increases, fixed cost per unit... |
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Definition
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Term
| when sales volume decreases, fixed cost per unit... |
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Definition
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Term
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Definition
| fixed costs magnify small changes in revenue to large change in profitability |
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Term
| calculating percentage change |
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Definition
| (alternative measure-Base measure)/base measure= % change |
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Term
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Definition
| increases in direct proportion to the number of tickets sold |
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Term
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Definition
| remains constant regardless of how many tickets are sold |
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Term
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Definition
| subtract variable costs from revenue. represents the amount available to cover fixed expenses and thereafter provide the company profits |
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Term
| When activity level changes for fixed costs: |
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Definition
| total cost remains constant, cost per unit changes inversely |
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Term
| when activity level changes for variable costs: |
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Definition
| total costs changes in direct proportion, cost per unit remains constant |
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Term
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Definition
| include both variable and fixed costs |
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Term
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Definition
| sales-variable costs-fixed costs=profit(0) |
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Term
| contribution margin per unit |
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Definition
| sales price per unit- variable cost per unit |
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Term
| break even point in units= |
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Definition
| fixed costs/contribution margin per unit |
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Term
| sales volume in units(for desired profit)= |
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Definition
| (fixed costs+ desired profit)/contribution margin per unit |
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