Accounting 9
The maximum outstanding balance allowed to a customer by a vendor. (p. 267)
credit limit
The period of time during which a customer may take a cash discount. (p. 263)
discount period
The date by which an invoice must be paid. (p. 252)
due date
A corporation can incur liabilities but cannot own property. (p. 244)
false
A transaction to record merchandise purchased with a trade discount would include a credit to Merchandise Discount. (p. 260)
false
The accounts payable ledger form contains the same columns as the general ledger except that it lacks a Credit Balance column. (p. 247)
false
The perpetual inventory method is easier to maintain than the periodic method. The perpetual method does not require records of the quantity and cost of individual goods. (p. 249)
false
The petty cash account Cash Short and Over is a permanent account. (p. 265)
false
The totals of the General amount columns of a cash payments journal are posted to the general ledger. (p. 270)
false
When journalizing a cash payment for advertising, the vendor's name is written in the Account Title column of the cash payments journal. (p. 261)
false
When supplies are purchased for use in the business, the amount is recorded as a debit to Purchases. (p. 262)
false
A journal amount column that is not headed with an account title. (p. 260)
general amount column
A list of assets, usually containing the value of individual items. (p. 249)
inventory
The retail price listed in a catalog or on an Internet site. (p. 260)
list price
Goods that a business purchases in order to sell. (p. 244)
merchandise
The goods a business has on hand for sale to customers. (p. 249)
merchandise inventory
A business that purchases and resells goods. (p. 244)
merchandising business
The price after the trade discount has been deducted from the list price. (p. 260)
net price
A merchandise inventory evaluated at the end of a fiscal period. (p. 249)
periodic inventory
An inventory determined by keeping a continuous record of increases, decreases, and the balance on hand of each item of merchandise. (p. 249)
perpetual inventory
When a periodic inventory is conducted by counting, weighing, or measuring items of merchandise on hand. (p. 249)
physical inventory
An invoice used as a source document for recording a purchase on account transaction. (p. 252)
purchase invoice
A transaction in which the items purchased are to be paid for later. (p. 252)
purchase on account
A form requesting that a vendor sell merchandise to a business. (p. 251)
purchase order
When a company that has purchased merchandise on account takes a cash discount. (p. 263)
purchases discount
A special journal used to record only purchases of merchandise on account. (p. 252)
purchases journal
A form requesting the purchase of merchandise. (p. 251)
requisition
A merchandising business that sells to those who use or consume the goods. (p. 244)
retail merchandising business
A listing of vendor accounts, account balances, and the total amount due to all vendors. (p. 272)
schedule of account payable
Each unit of ownership in a corporation. (p. 244)
share of stock
A journal amount column headed with an account title. (p. 252)
special amount column
A journal used to record only one kind of transaction. (p. 251)
special journal
The owner of one or more shares of stock. (p. 244)
stockholder
A ledger that is summarized in a single general ledger account. (p. 246)
subsidiary ledger
An agreement between a buyer and a seller about payment for merchandise. (p. 252)
terms of sale
A reduction in the list price granted to a merchandising business. (p. 260)
trade discount
A journal is proved and ruled whenever a journal page is filled, and always at the end of a month. (p. 269)
true
A purchase invoice lists the quantity, the description, and the price of each item and shows the total amount of the purchase. (p. 253)
true
Exceeding a vendor's credit limit can cause a disruption in the company's ability to purchase merchandise. (p. 267)
true
The articles of incorporation typically include the name and address of the business, its purpose for operating, any limitations on its activities, and rules for dissolving the corporation. (p. 244)
true
The contra account Purchases Discount has a normal credit balance. (p. 263)
true
The income statement of a merchandising business places Purchases in a section titled Cost of Goods Sold, separate from other expenses. (p. 250)
true
The terms of sale 2/15, n/30 mean that 2% of the invoice amount may be deducted if paid within 15 days of the invoice date or the total invoice amount must be paid within 30 days. (p. 263)
true
The total of accounts in the accounts payable ledger equals the balance of the controlling account, Accounts Payable. (p. 246)
true
The total of an accounts payable trial balance should equal the total of Accounts Payable. (p. 272)
true
Unlike a proprietorship, a corporation exists independent of its owners. (p. 245)
true
When a periodic inventory system is used, the cost of merchandise is recorded to Purchases. (p. 250)
true
When a perpetual inventory system is used, purchases of merchandise are accounted for directly to Merchandise Inventory. (p. 249)
true
A business from which merchandise, supplies, or other assets are purchased. (p. 246)
vendor
A business that buys and resells merchandise primarily to other merchandising businesses. (p. 244)
wholesale merchandising business
The subsidiary ledger containing vendor accounts. (p. 246)
account payable ledger
A legal document that identifies basic characteristics of a corporation. (p. 244)
articles of incorporation
The assets or other financial resources available to a business. (p. 244)
capital
The total shares of ownership in a corporation. (p. 244)
capital stock
A deduction that a vendor allows on an invoice amount to encourage prompt payment. (p. 260)
cash discount
A special journal used to record only cash payment transactions. (p. 260)
cash payments journal
The legal right for a business to conduct operations as a corporation. (p. 244)
charter
An account that reduces a related account on a financial statement. (p. 263)
contra account
An account in a general ledger that summarizes all accounts in a subsidiary ledger. (p. 246)
controlling account
An organization with the legal rights of a person which many persons or other corporations may own. (p. 244)
corporation
The amount a business pays for goods it purchases to sell. (p. 250)
cost of merchandise