The following are some of the terms discussed in the chapter:
1. Gross profit
2. Perpetual inventory system
3. Cost of goods sold
4. Purchase returns
5. Freight out
6. FOB shipping point
7. Periodic inventory system
8. Subsidiary ledger
9. Sales discounts
10. FOB destination
11. Sales allowance
12. Non-operating activities
13. Profit margin
14. Contra revenue account
15. Merchandise inventory
16. Purchase discounts
Instructions
Match each term with the best description below. Each term may be used more than once, or may not be used at all.
(a) An expense account that shows the cost of merchandise sold
(b) A group of accounts that share a common characteristic, such as all inventory accounts
(c) An account, such as Sales Discounts, that is deducted from a revenue account on the income statement
(d) The return of unsatisfactory purchased merchandise
(e) Freight terms where the seller will pay for the cost of shipping the goods
(f) An inventory system where the inventory records need to be updated at year end to show the inventory on hand
(g) A reduction in price given for unsatisfactory inventory
(h) Sales revenue less cost of goods sold
(i) Revenues, expenses, gains, and losses that are not part of the company's main operations
(j) Freight terms where the buyer will pay for the cost of shipping the goods
(k) An inventory system where the cost of goods sold is calculated and recorded with every sales transaction
(l) An asset that shows the cost of goods purchased for resale
(m) Profit divided by net sales
(n) A price reduction given by a seller for early payment on a credit sale