Merchandising, Corporate Structure, and Inventory Management Concepts

Merchandise

Goods that a business purchases to sell.

Merchandising business

A business that purchases and resells goods.

Retail merchandising business

A merchandising business that sells to those who use or consume the goods.

Wholesale merchandising business

A business that buys and resells merchandise primarily to other merchandising businesses.

Corporation

An organization with the legal rights of a person which many persons or other corporations may own.

Capital

The assets or other financial resources available to a business.

Share of stock

A unit of ownership in a corporation.

Stockholder

The owner of one or more shares of stock.

Capital stock

The total shares of ownership in a corporation.

Articles of incorporation

A legal document that identifies basic characteristics of a corporation, which is part of the application submitted to a state to become a corporation.

Charter

A state approves the formation of a corporation by issuing a charter, the legal right for a business to conduct operations as a corporation.

Vendor

A business from which merchandise, supplies, or other assets are purchased.

Subsidiary ledger

A ledger that is summarized in a single general ledger account.

Accounts payable ledger

The subsidiary ledger containing vendor accounts.

Controlling account

An account in a general ledger that summarizes all accounts in a subsidiary ledger.

Inventory

A list of assets, usually containing the value of individual items.

Merchandise inventory

The goods a business has on hand for sale to customers.

Perpetual inventory

An inventory determined by keeping a continuous record of increases, decreases, and the balance on hand of each item of merchandise.

Periodic inventory

A merchandise inventory evaluated at the end of a fiscal period.

Physical inventory

A periodic inventory conducted by counting, weighing, or measuring items of merchandise on hand.

Cost of merchandise

The amount a business pays for goods it purchases to sell.

Requisition

A form requesting the purchase of merchandise.

Purchase order

A form requesting that a vendor sell merchandise to a business.

Special journal

A journal used to record only one kind of transaction.

Purchase on account

A transaction in which the items purchased are to be paid for later.

Purchases journal

A special journal used to record only purchases of merchandise on account.

Special amount column

A journal amount column headed with an account title.

Purchase invoice

An invoice used as a source document for recording a purchase on account transaction.

Terms of sale

An agreement between a buyer and a seller about payment for merchandise.

Due date

The date by which an invoice must be paid.

Cash payments journal

A special journal used to record only cash payment transactions.

List price

The retail price listed in a catalog or on an Internet site.

Trade discount

A reduction in the list price granted to a merchandising business.

Net price

The price after the trade discount has been deducted from the list price.

Cash discount

A deduction that a vendor allows on an invoice amount to encourage prompt payment.

General amount column

A journal amount column that is not headed with an account title.

Discount period

The period of time during which a customer may take a cash discount.

Purchases discount

When a company that has purchased merchandise on account takes a cash discount.

Contra account

An account that reduces a related account on a financial statement.

Credit limit

The maximum outstanding balance allowed to a customer by a vendor.

Schedule of accounts payable

A listing of vendor accounts, account balances, and the total amount due to all vendors.