Merchandising Operations and the Multistep Income Statement

This set of flashcards covers key concepts from merchandising operations and the multistep income statement.

Operating Cycle

A series of activities a company undertakes to generate revenues and ultimately cash.

Inventory Shrinkage

The difference between expected ending inventory and actual ending inventory.

Periodic Inventory System

Inventory records are updated only at the end of the accounting period after a physical count.

Perpetual Inventory System

Inventory records are updated continuously, tracking purchases, sales, and returns in real time.

Historical Cost

The total cost incurred to acquire an asset, including transportation and setup.

Purchase Discounts

Discounts offered for prompt payment, often expressed as a fraction of the purchase price.

FOB Shipping Point

Ownership transfers to the buyer when the goods leave the seller’s shipping department.

FOB Destination

Ownership transfers to the buyer when the goods arrive at the customer's location.

Gross Profit

Net Sales minus Cost of Goods Sold.

Net Sales

Total sales revenue after deducting sales returns and allowances.