Accounting for Merchandising Businesses

Flashcards covering key concepts in accounting for merchandising businesses, including definitions and terms related to merchandising activities, inventory systems, and transaction accounting.

Merchandising Company

An enterprise that buys and sells goods to earn a profit.

Wholesaler

A business that sells goods to retailers.

Retailer

A business that sells goods directly to consumers.

Perpetual Inventory System

An accounting method that continuously updates inventory records for merchandise on hand and sold.

Cost of Goods Sold

The expense recognized when merchandise is sold.

Gross Profit

Sales revenue minus cost of goods sold.

Credit Terms

Terms specifying the timing of payments for merchandise.

FOB Shipping Point

The buyer pays freight costs and takes title to the goods as they leave the shipping point.

FOB Destination

The seller pays freight costs and title to the goods passes to the buyer upon arrival at the destination.

Purchase Returns and Allowances

Account adjustments for merchandise that is returned or allowances given for defects.

Journalize

To record transactions in a journal.

Transportation Costs

Freight costs incurred when transporting goods.

Debit Memo

A document issued to a supplier for returned goods.