Perpetual Inventory - Purchase Discounts definitions Flashcards
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.
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