Introduction to Financial Accounting
Study Notes & Key Definitions,2026
updated.
“merchandise inventory - CORRECT ANSWER -goods purchased for resale to
customers in the normal course of merchandising operations"
"wholesalers - CORRECT ANSWER -businesses that buy goods from
manufacturers and resell them to retailers"
"retailers - CORRECT ANSWER -businesses that buy goods from manufacturers or
wholesalers and resell them to the general public"
"periodic inventory system - CORRECT ANSWER -inventory system which does
not keep a continuous record of inventory on hand; a physical count is taken at the
end of the period to determine cost of goods sold and ending inventory"
"perpetual inventory system - CORRECT ANSWER -inventory system which
keeps a continuous record of inventory on hand and the cost of goods sold"
"subsidiary ledger - CORRECT ANSWER -accounting record that contains details
such as list of customers and accounts receivable due from each or a list of suppliers
and accounts payable due to each"
"purchase returns and allowances - CORRECT ANSWER -reduction in the
amount owed for a purchase due to returning merchandise or accepting
unsatisfactory goods"
"sales invoice - CORRECT ANSWER -a bill that documents the sale of goods to a
customer"
"credit terms - CORRECT ANSWER -payment terms for customers who buy on
account"
"n/30 - CORRECT ANSWER -credit term specifying that payment for a purchase is
due within 30 days after the date of that invoice"
, "n/eom - CORRECT ANSWER -credit term specifying that payment for a purchase
is due by the end of the month"
"purchase discount - CORRECT ANSWER -discount received on purchases by
paying early within a discount period"
"discount period - CORRECT ANSWER -period in which the customer can make
an early payment for a purchase and receive a discount on that purchase"
"sales revenue - CORRECT ANSWER -amount that a business earns from selling
its inventory"
"cost of goods sold - CORRECT ANSWER -cost of inventory that the business has
sold to its customers"
"compound journal entry - CORRECT ANSWER -a journal entry affecting more
than two accounts"
"sales return and allowances - CORRECT ANSWER -a reduction in the amount of
sales due to customers returning merchandise or accepting unsatisfactory goods"
"credit memorandum - CORRECT ANSWER -a document that supports the return
of goods from the customer or an allowance for unsatisfactory goods and the
adjustment to the customer's account balance"
"sales discount - CORRECT ANSWER -discount granted on sales for the
customer's early payment within a discount period; contra-account tosales revenue"
"freight charges - CORRECT ANSWER -cost of shipping merchandise from seller
to the buyer"
"title - CORRECT ANSWER -legally recognized rights to the possession and
ownership of property"
"free on board shipping point - CORRECT ANSWER -shipping term specifying
that title to goods passes to the buyer when the goods are shipped at the seller's
place of business; buyer pays shipping costs"
"free on board destination - CORRECT ANSWER -shipping term specifying that
title to goods passes to the buyer when goods are received at buyer's destination;
seller pays shipping costs"
Study Notes & Key Definitions,2026
updated.
“merchandise inventory - CORRECT ANSWER -goods purchased for resale to
customers in the normal course of merchandising operations"
"wholesalers - CORRECT ANSWER -businesses that buy goods from
manufacturers and resell them to retailers"
"retailers - CORRECT ANSWER -businesses that buy goods from manufacturers or
wholesalers and resell them to the general public"
"periodic inventory system - CORRECT ANSWER -inventory system which does
not keep a continuous record of inventory on hand; a physical count is taken at the
end of the period to determine cost of goods sold and ending inventory"
"perpetual inventory system - CORRECT ANSWER -inventory system which
keeps a continuous record of inventory on hand and the cost of goods sold"
"subsidiary ledger - CORRECT ANSWER -accounting record that contains details
such as list of customers and accounts receivable due from each or a list of suppliers
and accounts payable due to each"
"purchase returns and allowances - CORRECT ANSWER -reduction in the
amount owed for a purchase due to returning merchandise or accepting
unsatisfactory goods"
"sales invoice - CORRECT ANSWER -a bill that documents the sale of goods to a
customer"
"credit terms - CORRECT ANSWER -payment terms for customers who buy on
account"
"n/30 - CORRECT ANSWER -credit term specifying that payment for a purchase is
due within 30 days after the date of that invoice"
, "n/eom - CORRECT ANSWER -credit term specifying that payment for a purchase
is due by the end of the month"
"purchase discount - CORRECT ANSWER -discount received on purchases by
paying early within a discount period"
"discount period - CORRECT ANSWER -period in which the customer can make
an early payment for a purchase and receive a discount on that purchase"
"sales revenue - CORRECT ANSWER -amount that a business earns from selling
its inventory"
"cost of goods sold - CORRECT ANSWER -cost of inventory that the business has
sold to its customers"
"compound journal entry - CORRECT ANSWER -a journal entry affecting more
than two accounts"
"sales return and allowances - CORRECT ANSWER -a reduction in the amount of
sales due to customers returning merchandise or accepting unsatisfactory goods"
"credit memorandum - CORRECT ANSWER -a document that supports the return
of goods from the customer or an allowance for unsatisfactory goods and the
adjustment to the customer's account balance"
"sales discount - CORRECT ANSWER -discount granted on sales for the
customer's early payment within a discount period; contra-account tosales revenue"
"freight charges - CORRECT ANSWER -cost of shipping merchandise from seller
to the buyer"
"title - CORRECT ANSWER -legally recognized rights to the possession and
ownership of property"
"free on board shipping point - CORRECT ANSWER -shipping term specifying
that title to goods passes to the buyer when the goods are shipped at the seller's
place of business; buyer pays shipping costs"
"free on board destination - CORRECT ANSWER -shipping term specifying that
title to goods passes to the buyer when goods are received at buyer's destination;
seller pays shipping costs"
