| Average cost | Method to assign inventory cost to sales; the cost of available-for-sale units is divided by the number of units available to determine per unit cost prior to each sale that is then multiplied by the units sold to yield the cost of that sale.
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| Conservatism concept | Concept that prescribes the less optimistic estimate when two estimates are about equally likely.
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| Consistency concept | Concept that prescribes use of the same accounting method(s) over time so that financial statements are comparable across periods.
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| Days' sales in inventory | Estimate of number of days needed to convert inventory into receivables or cash; equals ending inventory divided by cost of goods sold and then multiplied by 365; also called days' stock on hand.
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| First-in, first-out (FIFO) | Method to assign cost to inventory that assumes items are sold in the order acquired; earliest items purchased are the first sold.
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| Gross profit method | Procedure to estimate inventory when 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.
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| Interim financial statements | Financial statements covering periods of less than one year; usually based on one-, three-, or six-month periods.
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| Inventory turnover | Number of times a company's average inventory is sold during a period; computed by dividing cost of goods sold by average inventory; also called merchandise turnover.
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| Last-in, first-out (LIFO) | Method to assign cost to inventory that assumes costs for the most recent items purchased are sold first and charged to cost of goods sold.
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| LIFO conformity rule | If LIFO is used for tax reporting, it must also be used for financial reporting.
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| Lower of cost or market (LCM) | Required method to report inventory at market replacement cost when that market cost is lower than recorded cost.
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| Net realizable value | Expected selling price (value) of an item minus the cost of making the sale.
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| Periodic inventory system | Method that records the cost of inventory purchased but does not continuously track the quantity available or sold to customers; records are updated at the end of each period to reflect the physical count and costs of goods available.
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| Perpetual inventory system | Method that maintains continuous records of the cost of inventory available and the cost of goods sold.
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| Specific identification | Method to assign cost to inventory when the purchase cost of each item in inventory is identified and used to compute cost of inventory.
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| Weighted average | Method to assign inventory cost to sales; the cost of available-for-sale units is divided by the number of units available to determine per unit cost prior to each sale that is then multiplied by the units sold to yield the cost of that sale.
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