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.
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