Financial and Managerial Accounting, 9th Edition

Merchandise -ANSWER- Products or goods that a company buys to resell .Wholesalers -ANSWER- Merchandisers that buy from manufacturers and sell to retailers .Retailers -ANSWER- Merchandisers that buy from manufacturers or wholesalers and sell to consumers .Net sales -ANSWER- Revenue from selling merchandise minus the cost of goods sold .Gross profit -ANSWER- Revenue from selling merchandise minus the cost of goods sold .Operating expenses -ANSWER- Expenses deducted from gross profit to determine net income .Merchandise inventory -ANSWER- Products that a company owns and intends to sell .Operating cycle -ANSWER- The process of purchasing merchandise for cash and collecting cash from selling the merchandise .Perpetual inventory system -ANSWER- An inventory system that updates accounting records for each purchase and sale of inventory .Periodic inventory system -ANSWER- An inventory system that updates accounting records for purchases and sales of inventory only at the end of a period .Invoice -ANSWER- A source document for recording a purchase transaction .Trade discounts -ANSWER- Deductions from list price to determine the invoice price .Credit terms -ANSWER- Cash discounts offered to purchasers for payment within a specified period of time .Cash discounts -ANSWER- Discounts offered to buyers to encourage early payment .Purchases allowances -ANSWER- Reductions in the cost of defective merchandise that a buyer acquires .Purchases returns -ANSWER- Merchandise that a buyer acquires but then returns to the seller .FOB shipping point -ANSWER- Title transfers at shipping point and buyer pays shipping costs .FOB destination -ANSWER- Title transfers at destination and seller pays shipping costs .Shrinkage -ANSWER- Loss of inventory determined by comparing physical count with recorded quantities .Multiple-step income statement -ANSWER- An income statement that provides details of net sales and expenses .Single-step income statement -ANSWER- An income statement that lists cost of goods sold as another expense and shows only one subtotal for total expenses .Classified balance sheet -ANSWER- A balance sheet that reports merchandise inventory as a current asset .Acid-Test ratio -ANSWER- A ratio used to assess a company's liquidity based on quick assets divided by current liabilities