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Perpetual Inventory - Purchase Discounts definitions

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  • Purchase Discount
    A reduction in the invoice price offered by a supplier for prompt payment within a specified period.
  • Perpetual Inventory System
    A method where inventory records are updated continuously for each purchase and sale transaction.
  • Accounts Payable
    A liability account representing amounts owed to suppliers for goods or services purchased on credit.
  • Inventory
    An asset account reflecting the cost of goods held for resale, adjusted for discounts in the perpetual system.
  • Journal Entry
    A formal accounting record documenting the debit and credit effects of a business transaction.
  • Credit Period
    The total number of days allowed by a supplier to pay an invoice in full.
  • Discount Period
    The limited time frame during which a buyer can pay less than the invoice amount by taking advantage of a purchase discount.
  • Discount Rate
    The percentage reduction from the invoice price available if payment is made within the discount period.
  • Net Amount
    The final payment due after deducting any applicable purchase discounts from the original invoice total.
  • Cash
    An asset account reflecting the amount of money paid to settle accounts payable after discounts are applied.
  • Accounting Equation
    The foundational relationship showing assets equal liabilities plus equity, maintained through all transactions.
  • Invoice Price
    The total amount billed by a supplier before any discounts are applied.
  • Supplier
    The party providing goods or services to a business, often offering discounts for early payment.
  • Terms of Sale
    The conditions specified by a supplier regarding payment timing and discount eligibility, such as '2 10 net 30.'
  • Liability
    An obligation arising from past transactions, such as amounts owed to suppliers for purchases on credit.