Accounting Chapter 9

Each unit of ownership in a corporation.

share of stock

Purchases discount is increased by a credit entry.

true

To replenish a $300 petty cash fund, if the petty cash custodian had receipts totaling $224 and cash of $74 in the petty cash box, one part of the journal entry is a a) debit to Cash Short and Over for $2. b) credit to Cash for $224. c) debit to Petty Cash for $224. d) credit to Cash Short and Over fro $2.

a

Merchandise with a list price of $1500.00 os purchased on account for $900.00 on August 1. Terms of sale are 2/10, n/30. Payment is made on August 17. The amount paid should be a) $1500 b) $900 c) $600 d) $882

b

Purchases returns and allowances a) increase the amount of purchases. b) decrease the amount of purchases. c) do not affect the amount of purchases. d) affect the cash flow.

b

If merchandise is purchased for $1000 on August 1, with terms of sale of 2/10, n/30, the amount due to the vendor on August 9 is a) $1000 b) $990 c) $980 d) $20

c

Since contra accounts are offsets to their related accounts, contra account normal balances are a) debits. b) credits. c) opposite the normal balances of their related accounts. d) the same as the normal balance of their related accounts.

c

Supplies bought for use in a business are recorded in the a) supplies expense account. b) purchases account. c) supplies account. d) cash account.

c

Total shares of ownership in a corporation.

capital stock

A deduction that a vendor allows on the invoice amount to encourage prompt payment.

cash discount

An organization with the legal rights of a person and which may be owned by many persons.

corporation

The purchases account is classified as a) an expense account. b) an asset account. c) a liability account. d) a cost account.

d

The source document for a cash purchase is a) a memorandum. b) an invoice. c) a receipt. d) a check.

d

A form prepared by the customer showing the price deduction taken by the customer for returns and allowances.

debit memorandum

If the actual petty cash on hand is $53.00 but the records show that $55.00 should be on hand, the case fund is said to be over.

false

Purchases Returns and Allowances is a contra account to Cost of Merchandise.

false

The purchases account is increased by a credit and decreased by a debit.

false

The terms of sale 1/10, n/30 mean that the customer may deduct 1% of the invoice amount if payment is made within 30 days of the invoice date.

false

Trade discounts normally are recorded in the purchases discount account.

false

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

purchase invoice

A cash discount on purchases taken by a customer.

purchases discount

Credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer's accounts payable.

purchases return

A merchandising business that sells to those who use or consume goods.

retail merchandising business

A journal used to record only one kind of transaction.

special journal

When purchases are recorded at their cost, including any related shipping costs and taxes, the Historical Cost Accounting concept is being applied.

true

When several journals are used, an abbreviation is used in the Post Ref. column of a ledger to show the journal from which the posting is made.

true