Accounting and Merchandising Business Vocabulary

Flashcards covering terms, journals, and documents related to merchandising businesses and subsidiary ledgers.

Merchandising business

A business that purchases and resells goods.

Retail merchandising

Sells to those who use or consume the goods.

Wholesale merchandising business

Buys and resells merchandise to other merchandising businesses.

Merchandise

Goods that a business purchases to sell to customers.

Vendor

A business from which merchandise, supplies, or other assets are purchased.

Subsidiary ledger

A ledger that is summarized in a single general ledger account (subledger).

Accounts Payable ledger

A subsidiary ledger containing vendor accounts (names and addresses of vendors) where the total amount owed equals the balances in a single general ledger account called "accounts payable."

Controlling Account

An account in the general ledger (accounts payable) that summarize all accounts in a subsidiary ledger.

Inventory

A list of assets, usually containing the value of individual items.

Merchandise inventory

The goods a business has on hand for sale to customers.

Purchases

The account title for buying merchandise; it has a debit balance and is placed in a section called "cost of merchandise sold."

Requisition

A form requesting the purchase of merchandise that includes a description, quantity, and required delivery date, and requires management's approval.

Purchase order

A form requesting that a vendor sell merchandise to a business.

Purchase journal

A special journal used only for buying merchandise on account; accounts payable must be the credit part of the journal entry.

Chase payment journal

A special journal used for all cash payments where cash must be the credit part of the entry.

Sales journal

A special journal used for all sales of merchandise on account where accounts receivable must be the debit part of the entry.

Cash receipts journal

A special journal used for all cash receipts where cash must be the debit part of the entry.

General journal

A journal used for all other journal entries such as adjusting entries, correcting entries, and returns.

Cost of merchandise

The price a business pays for goods in purchases to sell; it is an expense account with a debit balance that appears on the income statement.

Markup

The amount added to the cost of merchandise to establish the selling price.

Purchase on account

A transaction is which the merchandise purchased is to be paid for a later date.

Special amount column

A journal amount column headed with an account title.

Purchase Invoice

An invoice used as a source document for recording a purchase on account.

Terms of sale

An agreement between a buyer and seller about payment for merchandise.

Terms n/30

Payment is due within 30 days from the date on the invoice.

Due date

The date by which an invoice must be paid.

Cash Payment Journal

A special journal used to record only cash payment transactions.

List price

The retail price listed in a catalog or on an internet site.

Trade discount

A reduction in the price granted to a merchandising business.

Net price

The price after the trade discount has been deducted from the list price.

Cash discount

A deduction that a vendor allows on the invoice amount to encourage prompt payment.

General amount column

A journal amount column that is not headed with an account title.

Discount Period

Period of time during which a customer may take a cash discount.

Purchase discount

When a company that has purchased merchandise on account takes a discount; it is a contra account with a credit balance because it reduces the cost of recorded merchandise.

Contra account

An account that reduces a related account on a financial statement; the balance is the opposite of the account it is reducing.

Schedule of accounts payable

A report prepared after all entries in all journals are posted; the controlling account balance in the general ledger must equal the sum of all account balances in a subsidiary ledger at the end of the month.