ACCOUNTING_FINALS

• This process of going out of business is called

  LIQUIDATION
• To provide timely information, accountants have divided the economic life of a business into artificial time periods. This assumption is referred to as the

  PERIODICITY CONCEPT
• is a period of any twelve consecutive months.

  FISCAL YEAR
• A period of less than a year is an

  INTERIM PERIOD
• is the postponement of the recognition of “an expense already paid but not yet incurred”, or of “a revenue already collected but not yet earned”.

  DEFERRAL
• is the recognition of “an expense already incurred but unpaid” or “revenue earned but uncollected”.

  ACCRUAL
• to reflect expenses incurred during the accounting period that are unpaid and unrecorded.

  ACCRUING EXPENSES
• to reflect revenues earned during the accounting period that are uncollected and unrecorded.

  ACCRUING REVENUES
• is the amount an entity paid to acquire the depreciable asset.
• is the amount an entity paid to acquire the depreciable asset.

  ASSET COST
• Is the amount that the asset can probably be sold for at the end of its estimated useful life.

  SALVAGE VALUE
• Is the estimated number of periods that an entity can make use of the asset. Useful life is an estimate, not an exact measurement.

  USEFUL LIFE
• is said to be closed when an entry is made such that its balance becomes zero.

  TEMPORARY ACCOUNT
• Is prepared by the seller of goods and sent to the buyer. This document contains the name and address of the buyer, the date of sale and information—quantity, description and price—about the goods sold.

  SALES INVOICE
• is a document issued by the carrier—a trucking, shipping or airline— that specifies contractual conditions and terms of delivery such as freight terms, time, place, and the person named to receive the goods.

  BILL OF LADING
• is a formal notice to the debtor detailing the accounts already due.

  STATEMENT OF ACCOUNT
• evidences the receipt of cash by the seller or the authorized representative. It notes the invoices paid and other details of payment.

  OFFICIAL RECEIPT
• are printed forms with depositor’s name, account number and space for details of the deposit.

  DEPOSIT SLIPS
• is a written order to a bank by a depositor to pay the amount specified in the check from his checking account to the person named in the check. The entity issuing the check is the payor while the receiver is the payee.

  CHECK
• is a written request to the purchaser of an entity from an . employee or user department of the same entity that goods be purchased.

  PURCHASE REQUISITION
• is an authorization made by the buyer to the seller to deliver the merchandise as detailed in the form.

  PURCHASE ORDER
• is a document containing information about goods received from a vendor. it formally records the quantities and description of the goods delivered.

  RECEIVING REPORT
• is a form used by the seller to notify the buyer that his account is being decreased due to errors or other factors requiring adjustments.

  CREDIT MEMORANDUM
• are called purchase discounts from the buyer's viewpoint and sales discounts from the seller’s point of view.

  CASH DISCOUNTS
• encourage the buyers to purchase products because of markdowns from the list price.

  TRADE DISCOUNTS
• FOB shipping point

  BUYER SHOULDERS THE SHIPPING COST
• FOB destination

  SELLER BEARS THE SHIPPING COSTS
• the seller pays the transportation costs before shipping the goods sold

  FREIGHT PREPAID
• the freight company collects from the buyer. Payment by either party will not dictate who should ultimately shoulder the costs.

  FREIGHT COLLECT
• is an alternative to the periodic inventory system Under the perpetual inventory system, the inventory account is continuously updated.

  PERPETUAL INVENTORY SYSTEM
• is primarily used by businesses that sell relatively inexpensive goods and that are not yet using computerized scanning systems to analyze goods sold

  PERIODIC INVENTORY SYSTEM
• is the first part of merchandising income statement

  NET SALES
• consist of total sales for cash and on credit during an accounting period.

  GROSS SALES
• is the largest single expense of the merchandising business.

  COST OF SALES
• The Merchandise Inventory at the beginning of the accounting period is called the

  BEGINNING INVENTORY
• merchandise inventory at the end of the accounting period is called the

  ENDING INVENTORY
• make up the third major part of the income statement for a merchandising entity.

  OPERATING EXPENSES
• The foregoing entries for sales and purchases did not incorporate the effect of valueadded taxes on the transactions to simplify the illustrations. But the learning will not be complete without the following illustration. Knowledge gained from this section will prove useful in accomplishing the supplement to this text, Kashato Shirts: A Proctice Set for Basic Accounting.

  VALUE-ADDED TAX
• is a contra account and is accordingly deducted from purchases in the income statement

  PURCHASES RETURNS AND ALLOWANCES
• It is the cost of inventory that the entity has sold to customers. Every merchandising business has goods available for sale to customers. The goods available for sale during the year is the sum of two factors— merchandise inventory at the beginning of the year and net cost of purchases during the period.

  COST OF SALES