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Match the Following Terms with the Appropriate Definition

Question 189

Matching

Match the following terms with the appropriate definition.

Premises:

Responses:

Gross profit method

A method for estimating inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at retail prices.

Consistency concept

The accounting principle that a company use the same accounting methods period after period so that the financial statements of succeeding periods will be comparable.

Inventory turnover

One who receives and holds goods owned by another for purposes of selling the goods for the owner.

Consignor

An estimate of days needed to convert the inventory available at the end of the period into receivables or cash.

Consignee

The principle that aims to select the less optimistic estimate when two or more estimates are about equally likely.

Retail inventory method

The number of times a company's average inventory is sold during an accounting period.

Days’ sales in inventory

The method of assigning costs to inventory where the purchase cost of each item in inventory is identified and used to determine the cost of inventory.

Conservatism principle

An owner of goods who ships them to another party who will then sell the goods for the owner.

Lower of cost or market

A procedure for estimating inventory where the past gross profit rate is used to estimate the cost of goods sold, which is then subtracted from the cost of goods available for sale to determine the estimated ending inventory.

Specific identification method

The required method of reporting inventory at market when market is lower than cost.