Accounting Terminologies
Inventory
Goods held for sale or for use in production
Inventory System
Method used to track inventory quantities and costs
Periodic Inventory System
Inventory updated at the end of the period
Perpetual Inventory System
Inventory updated continuously
Cost of Goods Sold
Cost of inventory sold during a period
Physical Count
Actual counting of inventory on hand
Physical Control
Safeguarding assets physically | safes, locks
Purchases
Cost of goods bought for resale
Shrinkage
Loss of inventory due to theft, damage, or error
Goods held for sale or for use in production
Inventory System
Method used to track inventory quantities and costs
Periodic Inventory System
Inventory updated at the end of the period
Perpetual Inventory System
Inventory updated continuously
Cost of Goods Sold
Cost of inventory sold during a period
Physical Count
Actual counting of inventory on hand
Physical Control
Safeguarding assets physically | safes, locks
Purchases
Cost of goods bought for resale
Shrinkage
Loss of inventory due to theft, damage, or error
FIFO | First In, First Out
Inventory method where oldest goods are sold first
Inventory Valuation
Method used to assign costs to inventory
Cost of Goods Sold
Cost of inventory sold during a period
Ending Inventory
Inventory remaining at period-end
Inflation
Increase in prices over time
Gross Profit
Sales minus Cost of Goods Sold
Inventory Layers
Different purchase batches at different costs
Inventory method where oldest goods are sold first
Inventory Valuation
Method used to assign costs to inventory
Cost of Goods Sold
Cost of inventory sold during a period
Ending Inventory
Inventory remaining at period-end
Inflation
Increase in prices over time
Gross Profit
Sales minus Cost of Goods Sold
Inventory Layers
Different purchase batches at different costs
LIFO | Last In, First Out
Inventory method where the most recent goods are sold first
Inventory Valuation
Method used to assign costs to inventory
Cost of Goods Sold
Cost of inventory sold during a period
Ending Inventory
Inventory remaining at period-end
Inflation
Increase in prices over time
Gross Profit
Sales minus Cost of Goods Sold
LIFO Reserve
Difference between FIFO and LIFO inventory values
Inventory method where the most recent goods are sold first
Inventory Valuation
Method used to assign costs to inventory
Cost of Goods Sold
Cost of inventory sold during a period
Ending Inventory
Inventory remaining at period-end
Inflation
Increase in prices over time
Gross Profit
Sales minus Cost of Goods Sold
LIFO Reserve
Difference between FIFO and LIFO inventory values
Weighted Average
Inventory method that averages the cost of all units
Average Cost per Unit
Total cost ÷ total units available
Cost of Goods Sold
Cost of inventory sold
Ending Inventory
Inventory remaining at period-end
Inventory Valuation
Assigning costs to inventory
Units Available for Sale
Beginning inventory + purchases
Total Inventory Cost
Combined cost of all inventory
Inventory method that averages the cost of all units
Average Cost per Unit
Total cost ÷ total units available
Cost of Goods Sold
Cost of inventory sold
Ending Inventory
Inventory remaining at period-end
Inventory Valuation
Assigning costs to inventory
Units Available for Sale
Beginning inventory + purchases
Total Inventory Cost
Combined cost of all inventory
Retail Inventory Method
Inventory valuation method using selling prices to estimate cost
Retail Value
Selling price of inventory
Cost Value
Purchase cost of inventory
Cost-to-Retail Ratio
Cost ÷ Retail price
Ending Inventory
Inventory remaining at period-end
Net Sales
Sales after returns and allowances
Markups
Increases from cost to selling price
Inventory valuation method using selling prices to estimate cost
Retail Value
Selling price of inventory
Cost Value
Purchase cost of inventory
Cost-to-Retail Ratio
Cost ÷ Retail price
Ending Inventory
Inventory remaining at period-end
Net Sales
Sales after returns and allowances
Markups
Increases from cost to selling price
Inventory Error
Incorrect recording of inventory values
Beginning Inventory
Inventory at the start of a period
Ending Inventory
Inventory at the end of a period
Cost of Goods Sold
Cost of inventory sold
Overstatement
Recording an amount higher than actual
Understatement
Recording an amount lower than actual
Adjustment
Correction made to accounting records
Physical Count
Actual counting of inventory on hand
Incorrect recording of inventory values
Beginning Inventory
Inventory at the start of a period
Ending Inventory
Inventory at the end of a period
Cost of Goods Sold
Cost of inventory sold
Overstatement
Recording an amount higher than actual
Understatement
Recording an amount lower than actual
Adjustment
Correction made to accounting records
Physical Count
Actual counting of inventory on hand
Inventory Control
Procedures used to manage and safeguard inventory
Internal Controls
Policies and procedures designed to protect assets and ensure accuracy
Segregation of Duties
Dividing responsibilities among different employees
Physical Inventory Count
Actual counting of inventory on hand
Authorization
Approval required before transactions are completed
Documentation
Use of source documents to support transactions
Shrinkage
Loss of inventory due to theft, damage, or error
Fraud
Intentional deception for personal gain
Procedures used to manage and safeguard inventory
Internal Controls
Policies and procedures designed to protect assets and ensure accuracy
Segregation of Duties
Dividing responsibilities among different employees
Physical Inventory Count
Actual counting of inventory on hand
Authorization
Approval required before transactions are completed
Documentation
Use of source documents to support transactions
Shrinkage
Loss of inventory due to theft, damage, or error
Fraud
Intentional deception for personal gain
Merchandise
Goods bought for resale
Merchandise Transactions
Business activities involving buying and selling goods
Purchases
Cost of merchandise bought for resale
Sales
Revenue earned from selling merchandise
Purchase Returns
Merchandise returned to suppliers
Purchase Allowances
Price reductions for damaged goods
Sales Returns
Merchandise customers return
Sales Allowances
Price reductions given to customers
Trade Discount
Reduction from list price
Cash Discount
Discount for early payment | e.g., 2/10, n/30
Freight-In
Transportation cost paid by buyer
Goods bought for resale
Merchandise Transactions
Business activities involving buying and selling goods
Purchases
Cost of merchandise bought for resale
Sales
Revenue earned from selling merchandise
Purchase Returns
Merchandise returned to suppliers
Purchase Allowances
Price reductions for damaged goods
Sales Returns
Merchandise customers return
Sales Allowances
Price reductions given to customers
Trade Discount
Reduction from list price
Cash Discount
Discount for early payment | e.g., 2/10, n/30
Freight-In
Transportation cost paid by buyer
Cost of Goods Sold
Cost of inventory that has been sold during a period
Beginning Inventory
Inventory on hand at the start of the period
Ending Inventory
Inventory remaining at the end of the period
Purchases
Cost of goods bought for resale
Freight-In
Transportation cost paid to bring inventory to the business
Gross Profit
Sales minus Cost of Goods Sold
Net Sales
Sales minus returns and allowances
Cost of inventory that has been sold during a period
Beginning Inventory
Inventory on hand at the start of the period
Ending Inventory
Inventory remaining at the end of the period
Purchases
Cost of goods bought for resale
Freight-In
Transportation cost paid to bring inventory to the business
Gross Profit
Sales minus Cost of Goods Sold
Net Sales
Sales minus returns and allowances
Stock Count
Physical counting of inventory on hand
Physical Inventory
Actual inventory available in storage
Inventory Records
Recorded quantities of inventory
Discrepancy
Difference between physical count and records
Shrinkage
Loss of inventory due to theft, damage, or error
Cycle Count
Counting inventory in parts throughout the year
Full Stock Count
Counting all inventory at once
Adjustment
Correction made to inventory records
Physical counting of inventory on hand
Physical Inventory
Actual inventory available in storage
Inventory Records
Recorded quantities of inventory
Discrepancy
Difference between physical count and records
Shrinkage
Loss of inventory due to theft, damage, or error
Cycle Count
Counting inventory in parts throughout the year
Full Stock Count
Counting all inventory at once
Adjustment
Correction made to inventory records
Inventory Turnover
Number of times inventory is sold and replaced in a period
Average Inventory
Average value of inventory during a period
Cost of Goods Sold
Cost of goods sold during the period
Days Inventory Outstanding
Average number of days inventory is held
Inventory Efficiency
How effectively inventory is managed
Slow-Moving Inventory
Inventory that takes a long time to sell
Overstocking
Holding too much inventory
Number of times inventory is sold and replaced in a period
Average Inventory
Average value of inventory during a period
Cost of Goods Sold
Cost of goods sold during the period
Days Inventory Outstanding
Average number of days inventory is held
Inventory Efficiency
How effectively inventory is managed
Slow-Moving Inventory
Inventory that takes a long time to sell
Overstocking
Holding too much inventory
Cost Accounting
Accounting system used to track and control costs
Cost
Expense incurred to produce goods or services
Direct Cost
Cost directly traceable to a product
Indirect Cost
Cost not directly traceable | overhead
Fixed Cost
Cost that does not change with output
Variable Cost
Cost that changes with output
Overhead
Indirect production costs
Cost Control
Managing and reducing business costs
Accounting system used to track and control costs
Cost
Expense incurred to produce goods or services
Direct Cost
Cost directly traceable to a product
Indirect Cost
Cost not directly traceable | overhead
Fixed Cost
Cost that does not change with output
Variable Cost
Cost that changes with output
Overhead
Indirect production costs
Cost Control
Managing and reducing business costs
Job Order Costing
Costing system where costs are assigned to specific jobs
Job
A specific order, project, or batch
Job Cost Sheet
Document that records all costs for a job
Direct Materials
Materials directly used in a job
Direct Labor
Labor directly involved in production
Manufacturing Overhead
Indirect production costs
Total Job Cost
Total cost of completing a job
Unit Cost
Cost per unit produced
Costing system where costs are assigned to specific jobs
Job
A specific order, project, or batch
Job Cost Sheet
Document that records all costs for a job
Direct Materials
Materials directly used in a job
Direct Labor
Labor directly involved in production
Manufacturing Overhead
Indirect production costs
Total Job Cost
Total cost of completing a job
Unit Cost
Cost per unit produced
Process Costing
Costing system used for mass production of identical products
Process
A stage in production
Equivalent Units
Units expressed in terms of completed units
Cost per Unit
Average cost of producing one unit
Work in Process
Partially completed goods
Continuous Production
Ongoing production of similar items
Costing system used for mass production of identical products
Process
A stage in production
Equivalent Units
Units expressed in terms of completed units
Cost per Unit
Average cost of producing one unit
Work in Process
Partially completed goods
Continuous Production
Ongoing production of similar items
Activity-Based Costing
Method that assigns costs based on activities
Activity
Task or operation that consumes resources
Cost Driver
Factor that causes a cost to occur
Cost Pool
Group of related costs
Overhead Allocation
Assigning indirect costs to products
Cost Driver Rate
Cost per unit of activity
Traditional Costing
Overhead allocated using a single base | e.g., labor hours
Method that assigns costs based on activities
Activity
Task or operation that consumes resources
Cost Driver
Factor that causes a cost to occur
Cost Pool
Group of related costs
Overhead Allocation
Assigning indirect costs to products
Cost Driver Rate
Cost per unit of activity
Traditional Costing
Overhead allocated using a single base | e.g., labor hours
Overhead
Indirect costs of production
Overhead Allocation
Assigning indirect costs to products
Allocation Base
Activity used to assign overhead (e.g., labor hours
Predetermined Overhead Rate
Estimated overhead rate used before actual costs are known
Applied Overhead
Overhead assigned to production
Actual Overhead
Real overhead incurred
Overapplied Overhead
Applied > Actual
Underapplied Overhead
Applied < Actual
Indirect costs of production
Overhead Allocation
Assigning indirect costs to products
Allocation Base
Activity used to assign overhead (e.g., labor hours
Predetermined Overhead Rate
Estimated overhead rate used before actual costs are known
Applied Overhead
Overhead assigned to production
Actual Overhead
Real overhead incurred
Overapplied Overhead
Applied > Actual
Underapplied Overhead
Applied < Actual
CVP Analysis
Study of how cost, volume, and profit interact
Contribution Margin
Sales revenue minus variable costs
CM per Unit
Selling price − variable cost per unit
Break-Even Point
Level where total revenue = total cost
Fixed Costs
Costs that remain constant
Variable Costs
Costs that change with output
Profit
Revenue − total costs
Sales Volume
Number of units sold
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Study of how cost, volume, and profit interact
Contribution Margin
Sales revenue minus variable costs
CM per Unit
Selling price − variable cost per unit
Break-Even Point
Level where total revenue = total cost
Fixed Costs
Costs that remain constant
Variable Costs
Costs that change with output
Profit
Revenue − total costs
Sales Volume
Number of units sold
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