Inventory and Cost of Goods Sold

These flashcards cover key terms and concepts related to inventory and cost of goods sold as presented in the lecture notes.

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 that assumes the oldest inventory items are sold first.

LIFO (Last-in, First-out)

An inventory costing method that assumes the most recently purchased inventory items are sold first.

Weighted Average Cost

An inventory costing method that averages the costs of all inventory items available for sale.

Specific Identification

An inventory valuation method that tracks each specific item of inventory and its actual cost.

Net Realizable Value (NRV)

The estimated selling price of an asset, less the estimated costs necessary to make the sale.

Inventory Turnover Ratio

A measure of how many times inventory is sold and replaced over a period.

Lower of Cost or Market Rule (LCM)

A conservative approach to valuing inventory, where the inventory is recorded at cost or market value, whichever is lower.

Gross Profit

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

Operating Expenses

The costs incurred in the normal operation of a business, not including the cost of goods sold.