Financial Accounting - Merchandise Operations

These flashcards cover important vocabulary related to merchandising operations and inventory systems in financial accounting.

Merchandising Operations

Business activities involved in buying and selling goods.

Cost of Goods Sold (COGS)

The total cost of merchandise sold during a period.

Perpetual Inventory System

An inventory system that maintains detailed records of inventory and cost of goods sold continuously.

Periodic Inventory System

An inventory system that does not maintain detailed records of inventory and determines the cost of goods sold by physical count at the end of the period.

Sales Revenue

The income generated from sales of goods.

Freight Costs

Expenses related to the transportation of goods.

Purchase Discounts

Reductions in the price of purchases as an incentive for early payment.

Purchase Returns and Allowances

The right of a buyer to return goods that are damaged or defective or to receive a reduction in the purchase price.

Gross Profit

Sales revenue minus the cost of goods sold.

Sales Returns and Allowances

Contra revenue accounts that reduce total sales due to returned goods or allowances.