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Periodic Inventory - Purchases definitions Flashcards

Periodic Inventory - Purchases definitions
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  • Periodic Inventory System
    Accounting method where inventory updates occur at period end, using separate accounts for purchases, returns, allowances, and discounts.
  • Purchases Account
    Temporary account used to record the total cost of goods acquired for resale during a period, not directly increasing inventory.
  • Purchase Returns
    Value of goods sent back to suppliers for a refund, tracked in a contra account that reduces total purchases.
  • Purchase Allowances
    Reductions in purchase cost due to quality issues, where goods are kept but the supplier lowers the price.
  • Purchase Discounts
    Price reductions offered by suppliers for prompt payment, recorded separately to decrease the cost of inventory.
  • Contra Asset Account
    Account that offsets a related asset account, such as purchase returns or allowances, reducing the net value of inventory.
  • Accounts Payable
    Liability account representing amounts owed to suppliers for goods or services purchased on credit.
  • Inventory Account
    Asset account reflecting the value of goods held for resale, updated at period end in a periodic system.
  • Cost of Goods Sold
    Total expense of inventory sold during a period, calculated after reconciling purchases, returns, allowances, and discounts.
  • Reconciliation
    Process of combining purchases, returns, allowances, and discounts at period end to determine final inventory and cost of goods sold.
  • Merchandising Company
    Business that earns revenue by buying goods in bulk for resale to customers, often using inventory systems.
  • Asset
    Resource owned by a company, such as inventory, that provides future economic benefit.
  • Liability
    Obligation to pay debts, such as amounts owed to suppliers for inventory purchases.
  • Supplies Account
    Account used to record purchases of items not intended for resale, such as office materials.
  • Perpetual Inventory System
    Method where inventory records are updated continuously with each purchase or sale, unlike the periodic system.