Accounting Chapter 10

Credit terms of 2/10, n/30 mean that if the account is paid within

10 days, a 2% discount will be allowed

The amount of cash received for a sale on account of $1,000.00 with sales tax of $80.00 when the cash is received within the 2 percent discount period is

$1,058.40

For a sale on account of $1,000.00 with sales tax of $80.00, the amount recorded in the Accounts Receivable Debit column of a sales journal is

$1,080.00

If a customer buys $300.00 worth of merchandise and the sales tax is 8%, the total bill the customer must pay is ____.

$324.00

When cash is received on account, the balance of the ____.

accounts receivable account decreases

A Schedule of Accounts Receivable is prepared

after all current entries are posted

The journal entry for a cash receipt on account is ____.

debit Cash; credit Accounts Receivable

The journal entry for a cash and credit card sales transaction is ____.

debit Cash; credit Sales; credit Sales Tax Payable

A business should post sales on account transactions to the accounts receivable subsidiary ledger frequently to

ensure each customer account will show an up-to-date balance

A sale on account transaction ____.

increases the amount to be collected later from a customer

Marris Company records a $1,000.00 sale on account on May 23. On June 6, the customer pays the account. The sale should be recorded in the

sales journal on May 23

The amount of sales tax collected is recorded in a ____.

separate liability account

When merchandise is sold on account and sales tax is also collected,

the Accounts Receivable balance is increased

When posting the Accounts Receivable Credit column total of the cash receipts journal, return to the journal and write

the account number in parentheses under the column total

The total of the schedule of accounts receivable should equal ____.

the accounts receivable account balance in the general ledger

When a credit is posted to the accounts receivable ledger

the new amount posted in the Credit column is subtracted from the previous balance

The amount of sales tax on a sale is calculated as price of goods ____.

times the sales tax rate

A sales journal is used to record both cash sales and sales on account.

False

An invoice used as a source document for recording a sale on account is a purchase invoice.

False

Cash is proved when the total of the Cash Debit column of a cash receipts journal equals the next unused check stub.

False

Separate transactions are recorded for cash, credit card, and debt card totals listed on a terminal summary.

False

The amount of sales tax collected is an asset of the business until paid to the state government.

False

The total of each general amount column of a cash receipts journal is posted to the corresponding general ledger account.

False

Very few states in the United States require collecting a tax on sales of merchandise to customers.

False

When cash is received on account, Cash is increased and Accounts Receivable is increased.

False

A sale of merchandise increases the revenue of a business.

True

A sales invoice is also referred to as a sales ticket or a sales slip.

True

A special journal used to record only cash receipts transactions is a cash receipts journal.

True

Businesses must file reports with the proper government unit and pay the amount of sales tax collected.

True

Charge customer accounts are summarized in a general ledger account titled Accounts Receivable.

True

Double lines are ruled to show that totals have been verified as correct.

True

Every business collecting a sales tax needs accurate records of the amount of total sales and total sales tax collected.

True

For weekly cash and credit card sales, the asset account Cash is debited for the total of sales and sales tax, but the revenue account Sales is credited only for the total of sales.

True

Purchases and sales of merchandise are the two major activities of a merchandising business.

True

Regardless of when payment is received, the revenue should be recorded when a sale is made, not on the date cash is received.

True

Sales Tax Payable has a normal credit balance.

True

Sales tax rates are usually stated as a percentage of sales.

True

The amount of sales tax collected is recorded in a separate liability account titled Sales Tax Payable.

True

The balance of Accounts Receivable should equal the total of the schedule of accounts receivable.

True

The sales discount is calculated by multiplying the sales invoice amount by the sales discount rate.

True

The source document for receiving cash on account is a receipt.

True

To indicate that column totals are not be posted,

a check mark is placed in parentheses under the total

The amount of sales tax a business collects is ____.

a liability

The total amount due from all charge customers is summarized in a general ledger account titled ____.

Accounts Receivable

Recording revenue from transactions at the time goods or services are sold is an application of the accounting concept ____.

Realization of Revenue