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Perpetual Inventory - Purchases definitions Flashcards

Perpetual Inventory - Purchases definitions
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  • Perpetual Inventory System
    A method where inventory and related accounts are updated continuously with each purchase, return, or allowance.
  • Inventory
    Goods acquired for resale by a merchandising company, recorded as an asset until sold.
  • Accounts Payable
    A liability account representing amounts owed to suppliers for goods purchased on credit.
  • Purchase Return
    A transaction where previously bought goods are sent back to the supplier, reducing both inventory and liabilities.
  • Purchase Allowance
    A price reduction granted by a supplier for kept goods, often due to quality issues, lowering inventory and liabilities.
  • Debit
    An accounting entry that increases assets or decreases liabilities, such as adding to inventory.
  • Credit
    An accounting entry that increases liabilities or decreases assets, such as raising accounts payable.
  • Merchandising Company
    A business model focused on buying goods in bulk for resale to customers in smaller quantities.
  • Supplies
    Items used in daily operations, like office materials, not intended for resale or included in inventory.
  • Assets
    Resources owned by a company, such as inventory, that provide future economic benefits.
  • Liabilities
    Obligations to pay debts, such as amounts owed to suppliers for inventory purchases.
  • Journal Entry
    A formal accounting record of a transaction, showing debits and credits to relevant accounts.
  • Bulk Purchase
    Acquisition of large quantities of goods, typically at a lower unit price, for resale purposes.
  • On Account
    A purchase arrangement where payment is deferred, creating an obligation to pay in the future.
  • Equity
    The residual interest in company assets after deducting liabilities; unaffected by inventory purchases or returns.