Financial Accounting for Managers - Inventory and Cost of Goods Sold

These flashcards cover essential vocabulary and concepts related to inventory management and cost accounting, necessary for understanding financial statements and inventory costing methods in financial accounting.

Cost of Goods Sold (COGS)

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

FIFO (First-In, First-Out)

An inventory costing method where the oldest inventory items are sold first.

LIFO (Last-In, First-Out)

An inventory costing method where the most recently produced items are sold first.

Weighted Average Cost

An inventory costing method where the cost of goods sold and ending inventory are calculated using the average cost of all items.

Net Realizable Value (NRV)

The estimated selling price of an inventory item minus any costs expected to incur to sell it.

Lower of Cost or Net Realizable Value

A rule that requires inventory to be recorded at the lower of its cost or its net realizable value.

Merchandise Inventory

Inventory that consists of finished goods that are held for sale.

Work in Process Inventory

Inventory that is partially finished and is in the production process.

Finished Goods Inventory

Completed products ready for sale.

LIFO Reserve

The difference between the inventory reported using LIFO and FIFO methods.

Total assets

The total value of everything a company owns, including cash, accounts receivable, inventory, and property.

Accounts Payable

Short-term liabilities that a company owes to its creditors for goods or services purchased on credit.

Retained Earnings

The cumulative amount of net income retained in the company rather than being paid out as dividends.

Selling, General and Administrative Expenses (SG&A)

The operating expenses that are not directly tied to production.

Current Replacement Cost

The cost to replace an asset at its current market price.

Invoice Price

The amount that is debited to the inventory account upon purchase.