Lecture Notes on Accounting for Merchandising Operations

Flashcards covering key concepts from Chapter 4 on Accounting for Merchandising Operations, including definitions and ratios related to purchasing, sales, and inventory management.

Merchandising Activities

Activities associated with buying and selling goods to earn revenue.

Cost of Goods Sold (COGS)

The direct costs attributable to the production of the goods sold by a company.

Gross Margin Ratio

A measure of the amount of money left from revenues after subtracting the cost of goods sold.

Acid-Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities without relying on the sale of inventory.

Perpetual Inventory System

An inventory accounting system that continuously updates inventory records with each purchase and sale.

Periodic Inventory System

An inventory accounting system that updates inventory records only at the end of a period.

Purchase Discount

A reduction in the amount owed by a buyer when payment is made within a specified time.

Sales Allowance

A price reduction given to a buyer for defective or unacceptable merchandise.

Multiple-Step Income Statement

An income statement format that separates operating revenue and expenses from non-operating revenue and expenses.

Single-Step Income Statement

An income statement format that presents all revenues and gains together, followed by a list of all expenses and losses.