Definitions
The process that begins with analyzing and journalizing transactions and ends with the post-closing trial balance.
The Accounting Cycle
Accumulated Depreciation appears on this section of the balance sheet
Property, Plant, & Equipment (PPE or Fixed Assets)
Sales
The inventory method that is comparable to a gumball machine
FIFO Method
Sales minus the cost of merchandise sold.
Gross Profit
The entries that transfer the balances of the revenue, expense, and drawing accounts to the owner’s capital account.
Closing Entries
The order that financial statements are prepared: Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Owner's Equity
Income Statement, Statement of Owners Equity, Balance Sheet & Statement of Cash Flows
Terms for payment on account by the buyer to the seller.
Credit Terms
The Inventory valuation method that is like a barrel
LIFO Method
A method of inventory costing based on the assumption that the most recent merchandise inventory costs should be charged against revenue.
LIFO Method
A financial ratio that is computed by dividing current assets by current liabilities.
Current Ratio
Cash and other assets that are expected to be converted to cash or sold or used up, usually within one year or less, through the normal operations of the business.
Current Assets
The process by which a company spends cash, generates revenues, and receives cash either at the time the revenues are generated or later by collecting an accounts receivable
The Operating Cycle
The document containing records of individual accounts for items of inventory.
The Subsidiary Inventory Ledger
Measurement of how effectively a business is using its assets to generate sales
Asset Turnover
A method of inventory costing in which the cost of the units sold and in ending inventory is a weighted average of the purchase costs.
Weighted Average Cost
Unearned fees appear in this section of the Balance Sheet
Current Liability
Explain 2/10, n/30
2% discount if paid in 10 days or the full amount due in 30 days
Establishes an initial record of the receipt of inventory
Receiving Report
The ability to convert assets into cash.
Liquidity
The ability of a firm to pay its debts as they come due.
Solvency
The fixed asset that does not depreciate
Land
Returns to the seller by the customer or reductions from the initial selling price due to defective or damaged merchandise or goods that did not meet the customer’s expectations.
Customer Allowance
The method of costing inventory that assumes costs are charged based on the most recent purchases first
LIFO
The relationship between the volume of sales and inventory, computed by dividing the inventory at the end of the year by the average daily cost of goods sold.
Days Sales in Inventory
A liability account for estimated refunds and allowances that will be paid or granted customers in the future.
Customer Refunds Payable
Prepaid insurance is reported on the balance sheet as a
Current Asset
An amount paid by the seller to the buyer for merchandise that is defective, is damaged during shipment, or does not meet the buyer’s expectations.
The relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory.
Inventory Turnover
Freight terms in which the seller pays the transportation costs from the shipping point to the final destination.
The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred.
The FIFO Method
Accounts that report amounts for only one period.
Temporary Accounts
The way inventory is reported on a balance sheet
Current Asset
The estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions.
Net Realizable Value
This document authorizes the purchase of the inventory from an approved vendor.
Purchase Order