Sales, Inventory, Cost of Goods Sold (Term and Definition)

Are you looking for accounting terms and definitions around sales, inventory and cost of goods sold? Here they are:

  • Sales discount – A reduction given by a seller for prompt payment of a credit sale.
  • Sales invoice – A document that supports each credit sale.
  • Sales returns and allowances – Purchase returns and allowances from the seller’s perspective. See Purchase return and Purchase allowance, above.
  • Net sales – Sales less sales returns and allowances and less sales discounts.
  • Sales revenue (Sales) – The primary source of revenue in a merchandising company.
  • Contra-revenue account – An account that is offset against a revenue account on the income statement.
  • Cost of goods sold – The total cost of merchandise sold during the period.
  • Periodic inventory system – An inventory system under which the company does not keep detailed inventory records throughout the accounting period but determines the cost of goods sold only at the end of an accounting period.
  • Perpetual inventory system – An inventory system under which the company keeps detailed records of the cost of each inventory purchase and sale and the records continuously show the inventory that should be on hand.
  • Raw materials – Basic goods that will be used in production but have not yet been placed into production.
  • Work in process – That portion of manufactured inventory that has been placed into the production process but is not yet complete.
  • Finished goods inventory – Manufactured items that are completed and ready for sale.
  • Purchase allowance – A deduction made to the selling price of merchandise, granted by the seller so that the buyer will keep the merchandise.
  • Purchase discount – A cash discount claimed by a buyer for prompt payment of a balance due.
  • Purchase invoice – A document that supports each credit purchase.
  • Purchase return – A return of goods from the buyer to the seller for a cash or credit refund.
  • Gross profit – The excess of net sales over the cost of goods sold.
  • Gross profit rate – Gross profit expressed as a percentage, by dividing the amount of gross profit by net sales.
  • Income from operations – Income from a company’s principal operating activity; determined by subtracting cost of goods sold and operating expenses from net sales.
  • Multiple-step income statement – An income statement that shows several steps in determining net income.
  • Nonoperating activities -Various revenues, expenses, gains, and losses that are unrelated to a company’s main line of operations.
  • Operating expenses – Expenses incurred in the process of earning sales revenues.
  • Other expenses and losses – A nonoperating-activities section of the income statement that shows expenses and losses unrelated to the company’s main line of operations.
  • Other revenues and gains – A nonoperating-activities section of the income statement that shows revenues and gains unrelated to the company’s main line of operations.
  • Single-step income statement – An income statement that shows only one step in determining net income.
  • FOB destination – Freight terms indicating that the seller places the goods free on board to the buyer’s place of business, and the seller pays the freight.
  • FOB shipping point – Freight terms indicating that the seller places goods free on board the carrier, and the buyer pays the freight costs.

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