Exam 2

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Created by
Ashley Fannin

Cards (22)

  • Consistency Principle

    Businesses should use the same accounting methods and procedures from period to period
  • Disclosure Principle

    Financial statements should report enough information for outsiders to make knowledgeable decisions about the company
  • Materiality Concept

    A company must perform strictly proper accounting only for items that are significant to the businesses financial situation
  • Conservatism

    Business should report the least favorable figures in the financial statements when two or more possible options are presented
  • Four basic inventory costing methods:
    1. Specific identification
    2. First in, First out (FIFO)
    3. Last in, First out (LIFO)
    4. Weighted Average
  • Specific Identification Method

    Based on the specific cost of particular units of inventory
  • First in, First out (FIFO)
    First units purchased are the first to be sold.
  • Cost of goods available for sale
    Total cost spent on inventory that was available to be sold during a period
  • Last in, First out (LIFO)
    Most recent units purchased are the first to be sold
  • Weighted Average method

    Determined by dividing the Cost of Goods Available for Sale by the Number of Units Available after each purchase
  • Cost of Goods Sold (COGS)

    Inventory that has been sold to customers
  • Gross Profit (Gross Margin)
    Net Sales Revenue minus Cost of Goods Sold
  • Operating Expenses

    Expenses that occur in the entity’s ongoing operations
  • Periodic Inventory System
    Businesses must obtain a physical count of inventory to determine quantities on hand
  • Perpetual Inventory System
    Computerized record of merchandise inventory
  • Invoice

    Sellers request for payment from the buyer
  • Credit Terms (Payment Terms)

    Express Discount, Discount time period, and final due date. (ex. 3/15, n/30)
  • FOB Shipping Point
    Buyer takes ownership when the goods leave the sellers place of business.
  • FOB Destination
    Buyer takes ownership at the delivery (destination point).
  • Freight In
    Freight on purchased goods
    Cost to ship goods to the purchaser’s warehouse
  • Freight Out
    Freight on goods sold
    Cost to ship out of the seller’s warehouse
  • Gross Profit Percentage
    Gross Profit / Net Sales Revenue