Chapter 6: Accounting for Merchandising Businesses

These flashcards cover key terms and definitions related to accounting for merchandising businesses, specifically focusing on sales related transactions.

Sales

The total amount charged customers for merchandise sold, including cash sales and sales on account.

Sales Discounts

Reductions granted by the seller to customers for early payment of amounts owed; classified as a contra revenue account.

Sales Returns and Allowances

Reductions granted by the seller for damaged or defective merchandise; also a contra revenue account.

Credit Card Expense

The service fee charged by credit card companies for transactions.

Cost of Merchandise Sold

The cost of the merchandise sold to customers, including all costs of acquiring and preparing the merchandise for sale.

Perpetual Inventory System

An inventory accounting system that updates inventory records in real-time with each sale.

Credit Memo

A document issued to authorize a credit to the buyer’s account receivable for returned merchandise.

Cash Sales

Sales transactions where the payment is made in cash immediately at the point of sale.

Sales on Account

Sales transactions where the payment is to be received later, often involving accounts receivable.

Merchandise Inventory

The account that tracks the value of goods available for sale to customers.

Contra Revenue Account

An account that offsets revenue, such as sales discounts or sales returns.

Terms of Sale

Conditions under which sales are made, including payment terms and return policies.