Accounting Ch 5
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Cost of goods sold
The total cost of merchandise sold during the period.
- This expense is directly related to the revenue recognized from the sale
- of goods
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.
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.
FOB shipping point
- means that the seller places the goods free on board the carrier, and
- the buyer pays the freight costs.
- means that the seller places the goods free on board to the buyer's
- place of business, and the seller pays the freight.
- A cash discount claimed by a buyer for prompt payment of a balance
- The credit terms of a purchase on account may permit the buyer to claim a
- cash discount for prompt payment. The buyer calls this cash discount a purchase
- discount. This incentive offers advantages to both parties: The
- purchaser saves money, and the seller is able to shorten the operating
- cycle by converting the accounts receivable into cash earlier.
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