Adjusting Entries
Journal entries that a company makes at the end of its accounting period to bring the company's revenue and expense Glossary account balances up-to-date and to show the correct ending balances in its asset and liability accounts
Cash Discount
Percentage reduction of the invoice price if the customer pays the invoice within a specified period
Closing Entries
Entries made by a company at the end of an accounting period to create a zero balance in each revenue, expense, and withdrawals account, and to update the owner's equity by transferring the balances in the revenue, expense, and withdrawals accounts to the
Cost of Ending Inventory
Dollar amount of merchandise on hand, based on a physical count, at the end of the accounting period
Cost of Goods Sold
Major expense of a retail company consisting of the cost of the goods (merchandise) that it sells during the accounting period
Credit Memo
Business document that lists the information for a sales return or allowance
Financial Flexibility
Company's ability to adapt to change
General and Administrative Expenses
Operating expenses related to the general management of a company
Gross Profit
Net sales minus cost of goods sold
Gross Profit Percentage
Used to estimate the cost of ending inventory by multiplying the net sales by the historic gross profit percentage and subtracting this amount from net sales to determine the estimated cost of goods sold, and then subtracting this amount from the cost of
Inventory
Merchandise a retail company is holding for resale
Net Purchases
Amount of merchandise purchases adjusted for purchase returns, allowances, and discounts
Operating Capability
Company's ability to continue a given level of operations
Operating Expenses
Expenses (other than cost of goods sold) that a company incurs in its day-to-day operations
Operating Income
All the revenues earned less the expenses incurred in the primary operating activities of a company
Other Items
Revenues and expenses that are not directly related to the primary operations of a company
Periodic Inventory System
System that does not keep a continuous record of the inventory on hand and sold, but determines the inventory at the end of each accounting period by physically counting
Permanent Accounts
Accounts used for the life of a company to record the effects of its transactions on its balance sheet (assets, liabilities, and owner's capital accounts)
Perpetual Inventory System
System that keeps a continuous record of the cost of inventory on hand and the cost of inventory sold
Profit Margin
Net income divided by net sales
Quantity Discount
aka Trade Discount; Reduction in the sales price of a good or service because of the number of items purchased or because of a sales promotion
Ratio Analysis
Computations made in financial analysis in which an item on a company's financial statements is divided by another related item
Risk
Amount of uncertainty that exists about the future operations of a company
Sales Allowance
When a customer agrees to keep damaged merchandise and the company refunds a portion of the original sales price
Sales Discount
Percentage reduction of the invoice price if the customer pays the invoice within a specified period
Sales Return
When a customer returns previously purchased merchandise and receives a refund
Selling Expenses
Operating expenses related to the sales activities of a company
Statement of Changes in Owner's Equity
Statement that summarizes the transactions that affected owner's equity during the accounting period
Temporary Accounts
Accounts used for one accounting period to record the effects of a company's transactions on its net income (revenues and expenses)