Sales Related Transactions in Merchandising Businesses

These flashcards cover key terms and definitions related to sales transactions in merchandising businesses, focusing on the perpetual inventory system.

Sales

The total amount charged to customers for merchandise sold, including cash sales and sales on account.

Sales Discounts

Reductions granted by the seller to customers for early payment of amounts owed; classified as a contra revenue account.

Sales Returns and Allowances

Credited amounts granted by the seller to customers for damaged or defective merchandise; also a contra revenue account.

Credit Card Expense

The service fee charged by credit card companies for transactions.

Cost of Merchandise Sold

The cost incurred to sell merchandise to customers, including acquisition and preparation costs.

Perpetual Inventory System

An accounting method that continuously updates inventory records for each transaction.

Credit Memo

A document that authorizes a credit to reduce the buyer’s account receivable in case of returns.

Cash Sales

Sales transactions where payment is received in cash at the time of purchase.

Sales on Account

Sales transactions where payment is to be received in the future.

Contra Revenue Account

An account that offsets revenue accounts, typically used for sales returns, allowances, and discounts.

Receipts on Account

Payments received from customers for prior credit sales, sometimes involving discounts.

FOB Shipping Point

Means the buyer takes responsibility for goods as soon as they are shipped, affecting shipping costs.