Goods available for sale: Includes all items that have been transformed from raw materials to finished goods.
Gross profit: (Sales - the cost of merchandise sold)
Gross Profit Percentage: (Gross profit / sales)
Operating income: (Gross profit – operating expenses)
Net Income: (Revenues – expenses)
Selling expenses: Costs directly related to the selling of a product or service. A category in the income sheet under operating expenses before administrative expenses.
Administrative/general expenses: Expenses incurred in the administration or general operations of the business; costs not directly related to selling, such as officer salaries. A category in the income sheet under operating expenses following selling expenses.
Ending Inventory: Cost of good sold = beginning inventory + purchases – ending inventory.
Multiple-step income statement: A form of income statement that contains several sections, subsections, and subtotals.
Single-step income statement: A form of income statement that deducts the total of all expenses in one step from the total of all revenues. The single-step form emphasizes total revenues and total expenses in determining net income. A criticism of the single-step form is that gross profit and operating income are not reported.
Bank reconciliation: Analysis that details the items responsible for the difference between the cash balance reported in the bank statement and the cash balance in the ledger.
- : Coins, currency (paper money), checks, money orders, and money on deposit available for unrestricted withdrawal from banks and other financial institutions. (Anything a bank would accept for deposit).
Accounts receivable: Receivables created by selling stuff on credit. The most common transaction creating a receivable is selling stuff on account (on credit).
Direct write-off method records bad debt expense only when an account is determined to be worthless.
Days’ sales in receivables: Estimate of the average number of days it takes to collect accounts receivable, = average daily sales / average accounts receivable.
Return on sales: Profitability metric computed by dividing net/operating income by sales.