Accounting for Merchandising Businesses

These flashcards cover key terms and concepts related to the accounting practices for merchandising businesses, including inventory systems, financial statements, and cost accounting.

Merchandising Businesses

Businesses that generate revenue by selling goods purchased from suppliers.

Merchandise Inventory

Goods purchased for resale by a retail or wholesale business.

Gross Profit

The difference between sales revenue and the cost of goods sold.

Net Income

The profit of a company after all expenses, including selling and administrative expenses, are deducted from gross margin.

Perpetual Inventory System

An inventory tracking method where the inventory account is adjusted constantly throughout the accounting period.

Product Costs

All costs incurred to acquire merchandise and prepare it for sale.

Selling and Administrative Costs

Costs that are not included in inventory; sometimes referred to as period costs.

FOB Shipping Point

Shipping term indicating the buyer is responsible for transportation costs.

FOB Destination

Shipping term indicating the seller is responsible for transportation costs.

Inventory Shrinkage

Loss of inventory due to theft, damage, or misplacement.

Common Size Income Statement

A financial statement that displays information in percentages for easier comparison.

Periodic Inventory System

An inventory tracking method where no entries are made during the period, and cost of goods sold is determined at the end of the period.