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cash discount
provides a discount on the final price after purchase, if a retailer pays within a discount window, typically stated in days
cost of goods sold (COGS)
expense account that houses all costs associated with getting a product ready for sale
FOB destination point
transportation terms whereby the seller transfers ownership and financial responsibility at the time of delivery
FOB shipping point
transportation terms whereby the seller transfers ownership and financial responsibility at the time of shipment
freight-in
buyer is responsible for when receiving shipment from a seller
freight-out
seller is responsible for when shipping to a buyer
goods in transit
time in which the merchandise is being transported from the seller to the buyer
gross margin
amount available after deducting cost of goods sold from net sales, to cover operating expenses and profit
gross profit margin ratio
proportion of margin a company attains, above their cost of goods sold to cover operating expenses and profit, calculated by subtracting cost of goods sold from total net revenue to arrive at gross profit and then taking gross profit divided by total net revenues
gross purchases
original amount of the purchase without factoring in reductions for purchase discounts, returns, or allowances
gross sales
original amount of the sale without factoring in reductions for sales discounts, returns, or allowances
income from operations
gross margin less deductions for operating expenses
merchandising company
resells finished goods produced by a manufacturer (supplier) to customers
net income
when revenues and gains are greater than expenses and losses
net purchases
outcome of purchase discounts, returns, and allowances deducted from gross purchases
net sales
outcome of sales discounts, returns, and allowances deducted from gross sales
operating cycle
amount of time it takes a company to use its cash to provide a product or service and collect payment from the customer
operating expenses
daily operational costs not associated with the direct selling of products or services
other revenue and expenses
revenues and expenses not associated with daily operations, or the sale of goods and services
ownership of inventory
which party owns the inventory at a particular point in time, the buyer or the seller
periodic inventory system
updates and records the inventory account at certain, scheduled times at the end of an operating cycle
perpetual inventory system
system that automatically updates and records the inventory account every time a sale or purchase of inventory occurs
physical inventory count
manual stock check of inventory to make sure what is recorded on the books matches what is actually in the warehouse and on the sales floor
point of transfer
when the responsibility for the inventory transfers from the seller to the buyer
purchase discounts
provide an incentive for the retailer to pay early on their accounts, by issuing a reduced rate on their final purchase cost; the discount reduces the value of merchandise inventory
purchase returns and allowances
retailer receives a partial or full refund from the manufacturer for defective merchandise
sales discounts
reduction in the selling price offered to customers who pay their account within the discount period; the actual account is a contra revenue account that reduces sales
sales returns and allowances
contra revenue account with a normal debit balance that reduces the gross sales figure at the end of the period; the customer returns merchandise with a sales return, and keeps the merchandise with a sales allowance
service company
provides intangible services to customers, and does not have inventory
trade discount
reduction to the advertised manufacturer’s price during negotiation of a final purchase price
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