"CLEP Financial Accounting," Vocabulary from Chapter 12

This list focuses on merchandise inventories.

Here are links to all the chapters of the test prep book published by Research & Education Association: Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5, Chapter 6, Chapter 7, Chapter 8, Chapter 9, Chapter 10, Chapter 11, Chapter 12, Chapter 13, Chapter 14, Chapter 15, Chapter 16, Chapter 17, Chapter 18, Chapter 19, Chapter 20
25 words 15 learners

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Full list of words from this list:

  1. merchandise
    commodities offered for sale
  2. inventory
    the merchandise that a shop has on hand
  3. gross
    before any deductions
  4. margin
    the net sales minus the cost of goods and services sold
  5. periodic
    happening or recurring at regular intervals
  6. perpetual
    uninterrupted in time and indefinitely long continuing
  7. discount
    an amount or percentage deducted
  8. vendor
    someone who exchanges goods or services for money
  9. reduction
    the act of decreasing something
  10. resolve
    bring to an end; settle conclusively
  11. complaint
    an expression of grievance or resentment
  12. specific
    distinguishing something particular or unique
  13. unit
    a single undivided whole
  14. item
    a whole individual unit
  15. quantity
    how much there is or how many there are of something
  16. weight
    a coefficient to represent elements' relative importance
  17. average
    the middle value of an ordered set of values
  18. freight
    the charge for transporting something by common carrier
  19. reasonable
    marked by sound judgment
    The accounting profession allows any business to select any inventory system as long as it presents inventory with reasonable accuracy. Expect a trap if the CLEP test asks you which inventory system seems the most logical. The four inventory systems are FIFO (first in, first out), LIFO (last in, first out), weighted average, and specific unit.
  20. consistency
    uniformity or stability in arrangement, behavior, or quality
    The Consistency Principle requires that businesses not switch back and forth from one inventory system to another.
  21. disclosure
    the act of making something evident
    The Disclosure Principle requires businesses to reveal the type of inventory system used.
  22. principle
    a rule or standard especially of good behavior
    Under the Conservatism Principle (which requires a business to err on the side of reporting less net income), the Lower of Cost or Market Principle requires that businesses lower their inventory accounts if damage or a change in the market makes the inventory less valuable.
  23. formula
    a statement expressing some fundamental principle
    --beginning inventory + ending inventory divided by 2 = average inventory
    --beginning inventory + net purchases = goods available for sale (GAS)
    --GAS - ending inventory = cost of goods sold (CGS)
    --CGS divided by average inventory = inventory turnover
    --sales - CGS = gross profit or gross margin
    --365 divided by inventory turnover = days in inventory
    --purchases - purchase discounts - purchase returns and allowances + freight-in = net purchases
  24. percent
    a proportion in relation to a whole
    --cost of goods sold divided by total sales = CGS%
    --100% - gross profit percent (GP%) = CGS%
    --gross profit divided by total sales = GP%
  25. clue
    evidence that helps to solve a problem
    --On the CLEP exam, if a problem has an inventory record that changes with every purchase and sale, it is a perpetual inventory; if it shows the inventory account changing only once a year, it is a periodic inventory.
    --The CLEP exam will test your knowledge of the cost of goods sold formula by (1) finding missing numbers, and (2) calculating the effect of errors.
Created on November 2, 2016 (updated December 14, 2016)

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