Perpetual Inventory - Purchases definitions Flashcards
Perpetual Inventory - Purchases definitions
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Perpetual Inventory System A method where inventory and related accounts are updated continuously with each purchase, return, or allowance. Inventory Goods acquired for resale by a merchandising company, recorded as an asset until sold. Accounts Payable A liability account representing amounts owed to suppliers for goods purchased on credit. Purchase Return A transaction where previously bought goods are sent back to the supplier, reducing both inventory and liabilities. Purchase Allowance A price reduction granted by a supplier for kept goods, often due to quality issues, lowering inventory and liabilities. Debit An accounting entry that increases assets or decreases liabilities, such as adding to inventory. Credit An accounting entry that increases liabilities or decreases assets, such as raising accounts payable. Merchandising Company A business model focused on buying goods in bulk for resale to customers in smaller quantities. Supplies Items used in daily operations, like office materials, not intended for resale or included in inventory. Assets Resources owned by a company, such as inventory, that provide future economic benefits. Liabilities Obligations to pay debts, such as amounts owed to suppliers for inventory purchases. Journal Entry A formal accounting record of a transaction, showing debits and credits to relevant accounts. Bulk Purchase Acquisition of large quantities of goods, typically at a lower unit price, for resale purposes. On Account A purchase arrangement where payment is deferred, creating an obligation to pay in the future. Equity The residual interest in company assets after deducting liabilities; unaffected by inventory purchases or returns.