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Chapter 6

Horizontales
An inventory costing method that assumes the last costs into inventory are the first costs out to cost of goods sold. This method leaves the oldest costs
An inventory costing method based on the average cost of inventory during the period. Average cost is determined by dividing the cost of goods available by the number of units available. Also called the weighted-average method
An inventory costing method by which the first costs into inventory are the first costs out to cost of goods sold. Ending inventory is based on the costs of the most recent purchases.
A principle that states that a business's financial statements must report enough information for outsiders to make knowledgeable decisions about the business. The company should report relevant and representationally faithful information about its financial affairs
Gross profit divided by net sales revenue. Also called the gross margin percentage
A decrease in the cost of purchases earned by making an early payment to the vendor
The ratio of cost of goods sold to average inventory. The ratio indicates how rapidly (in terms of times per year) inventory is sold.
Verticales
A U.S. GAAP rule that requires inventory be reported in financial statements at whichever is lower
The cost of the inventory a business has sold to customers.