Accounting -- chapter 5 -- terms

Inventory -- all the goods that the company owns and expects to sell in the normal course of operations
periodic inventory system -- a system in which the business does not keep a continuous record of inventory on hand. At the end of the period, it makes the physical count of on hand inventory and uses this information to prepare the financial statements
perpetual inventory system -- the accounting inventory system in which the business keeps a running record of inventory and cost of goods sold
invoice -- a seller's request for cash from the purchaser
sales revenue -- the amount that a merchandiser earns from selling its inventory. Also called sales
cost of goods sold -- the cost of the inventory that the business is sold to customers. Also called cost of sales
sales returns and allowances -- decrease in the seller's receivables from a customer's return of merchandise or from granting the customer an allowance from the amount owed to the seller. A Contra account to sales revenue
sales discount -- reduction in the amount receivable from a customer, offered by the seller as an incentive for the customer to pay promptly. A Contra account to sales revenue
net sales revenue -- sales revenue less sales discounts and sales returns and allowances
Gross profit -- excess of net sales revenue over cost of goods sold. Also called gross margin
operating expenses -- expenses, other than cost of goods sold, that are incurred in the entity's major line of business. Examples include rent, depreciation, salaries, wages, utilities, and supplies expense
operating income -- Gross profit minus operating expenses plus any other operating revenues. Also called income from operations
other revenue -- revenue that is outside the main operations of the business, such as a gain on the sale of plant assets
other expense -- expense that is outside the main operations of a business, such as a loss on the sale of plant assets
multistep income statement -- format that contains subtotals to highlight significant relationships. In addition to net income, it reports gross profit in operating income
single step income statement -- format that groups all revenues together and then lists and deducts all expenses together without drawing any subtotals
gross profit percentage -- Gross profit divided by net sales revenue. A measure of profitability. Also called gross margin percentage
inventory turnover -- ratio of cost of goods sold to average inventory. Measures the number of times a company sells its average level of inventory during a year