(See related pages)
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| Conservatism principle | The accounting principle that says when faced with two or more equally likely amounts, the least optimistic value should be selected. (See page(s) 360) |
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| Consignee | One who receives and holds goods owned by another party for the purpose of selling the goods for the owner. (See page(s) 347) |
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| Consignor | An owner of goods who ships them to another party who will then sell the goods for the owner. (See page(s) 347) |
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| Consistency principle | The accounting requirement that a company use the same accounting methods period after period so that the financial statements of succeeding periods will be comparable. (See page(s) 359) |
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| Cost-to-benefit constraint | See materiality principle. (See page(s) 347) |
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| Days' sales in inventory | An estimate of how many days it will take to convert the inventory on hand into accounts receivable or cash; calculated by dividing the ending inventory by cost of goods sold and multiplying the result by 365. (See page(s) 377) |
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| First-in, first-out inventory pricing (FIFO) | The pricing of an inventory under the assumption that inventory items are sold in the order acquired; the first items received were the first items sold. (See page(s) 352) |
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| Full disclosure principle | The GAAP that requires financial statements (including footnotes) to report all relevant information about the operations and financial position of the entity. (See page(s) 358) |
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| Gross profit method | A procedure for estimating an ending inventory in which the past gross profit rate is used to estimate cost of goods sold, which is then subtracted from the cost of goods available for sale to determine the estimated ending inventory. (See page(s) 365) |
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| Gross profit ratio | Measures how much of net sales is gross profit; calculated as gross profit divided by net sales; also known as the gross margin ratio. (See page(s) 365) |
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| Internal controls | The policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. (See page(s) 348) |
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| Inventory turnover | See merchandise turnover. (See page(s) 376) |
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| Last-in, first-out inventory pricing (LIFO) | The pricing of an inventory under the assumption that the items most recently purchased are sold first and their costs are charged to cost of goods sold. (See page(s) 352) |
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| Lower of cost or market (LCM) | The required method of reporting merchandise inventory in the balance sheet where market value is reported when market is lower than cost; the market value may be defined as net realizable value or current replacement cost on the date of the balance sheet. (See page(s) 360) |
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| Market | Defined as either net realizable value or replacement cost. (See page(s) 361) |
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| Materiality principle | This GAAP states that an amount may be ignored if its affect on the financial statements is not important to their users; also called cost-to-benefit constraint. (See page(s) 347) |
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| Merchandise turnover | The number of times a company's average inventory was sold during an accounting period, calculated by dividing cost of goods sold by the average merchandise inventory balance; also called inventory turnover. (See page(s) 376) |
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| Moving weighted average | A perpetual inventory pricing system in which the unit cost in inventory is recalculated at the time of each purchase by dividing the total cost of goods available for sale at that point in time by the corresponding total units available for sale. The most current moving weighted average cost per unit is multiplied by the units sold to determine cost of goods sold. (See page(s) 351) |
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| Net realizable value (NRV) | The expected sales price of an item minus the cost of making the sale. (See page(s) 347) |
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| Physical count | To count merchandise inventory for the purpose of reconciling goods actually on hand to the inventory control account in the General Ledger. (See page(s) 347) |
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| Replacement cost | Current cost of purchasing an item. (See page(s) 361) |
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| Retail | The selling price of merchandise inventory. (See page(s) 366) |
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| Retail inventory method | A method for estimating an ending inventory cost based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at marked selling prices. (See page(s) 366) |
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| Specific identification | The pricing of an inventory where the purchase invoice of each item in the ending inventory is identified and used to determine the cost assigned to the inventory. (See page(s) 350) |
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| Taking an inventory | See physical count. (See page(s) 347) |
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| Weighted average | See moving weighted average inventory costing method. (See page(s) 351) |
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| Weighted average | A periodic inventory pricing system in which the total cost of goods available for sale is divided by the total units available for sale. The resulting weighted average unit cost is multiplied by the units in ending inventory and then by the units that were sold. (See page(s) 371) |