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Merchandising Activities
Actions taken by companies to buy and sell products for profit.
Acid-Test Ratio
A liquidity ratio that measures a company's ability to cover its current liabilities without relying on the sale of inventory.
Operating Cycle
The time period from the purchase of inventory to the collection of cash from the sale of that inventory.
Inventory Systems
Methods used to account for inventory, particularly perpetual and periodic systems.
Perpetual System
An inventory tracking method that updates inventory records continuously as purchases and sales occur.
Purchase Discounts
Price reductions offered by sellers to encourage prompt payment by buyers.
Sales Returns and Allowances
Reductions in the sales revenue due to returned goods or allowances given to customers.
Gross Profit
Sales revenue minus the cost of goods sold.
Multiple-Step Income Statement
An income statement that separates operating revenues and expenses from non-operating results.
Single-Step Income Statement
An income statement that groups all revenues and expenses together without separating operating and non-operating items.
Sales Discounts
Reductions in the selling price offered to customers who pay their bills promptly.
Closing Entries
Journal entries made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts.
Cost of Goods Sold
The direct costs attributable to the production of the goods sold by a company.
Purchase Allowance
A price reduction granted to a buyer after the sale of defective or unacceptable merchandise.
Transportation Costs
Costs incurred to transport goods from the seller to the buyer, influencing inventory costs.
Accounts Payable
Liabilities representing the amount a company owes to suppliers for goods and services purchased on credit.
Sales Refund Payable
A current liability reflecting the estimated amount expected to be refunded to customers for returned goods.
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