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The term inventory refers to the goods held by a business concern for resale. The sale of inventory is considered the primary source of generating revenues for the business entities.

The cost of goods sold denotes the cost associated directly with the sale of products. It is computed by adding purchases in the opening inventory and subtracting the closing inventory.

An inventory system that tracks the incoming and outgoing merchandise in a continuous manner is termed a perpetual inventory system. This inventory system record and maintains transactions electronically.

In business terms, vendor denotes the person/individual or a business entity that sells the products or provides services to other business entities. Vendors provide goods at retail and wholesale prices.

An inventory system that updates theinventory-related transactions on a periodic basis is termed a periodic inventory system. Under this system, a business entity tracks its opening and closing inventory.

Operating expenses refer to the costs spent by a business entity on its core operations other than the cost of goods sold. It includes rent, utilities, salaries, and other expenses that facilitate business operations.

Gross profit denotes the profit generated by a company after deducting all the costs associated with manufacturing and selling a product. It is computed by subtracting the cost of goods sold from net sales revenue.