Accounting ch 9

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Controlling account

An account in a general ledger that summarizes all accounts in a subsidiary ledger

Contra account

An account that reduces a related account on a financial statement

Terms of sale

An agreement between a buyer and a seller about payment for merchandise

Perpetual inventory

An inventory determined by keeping a continuous record of increases, decreases, and the balance on hand of each item of merchandise

Corporation

An organization with the legal rights of a person which many persons or other corporations may own

The purchases account is classified as

Cost of goods sold on account

To replenish a $300.00 petty cash fun, if the petty cash custodian had receipts totaling $224.00 and cash of $74.00 in the petty cash box, one part of the journal entry is

Debit to cash short and over for $2.00

A merchandising business places purchases in the operating expenses section of the income statement

False

A transaction to record merchandise purchases with a trade discount would include a debit to merchandise discount

False

The terms of sale of 1/10, n/30 means that 1/10, or 10%, of the invoice amount may be deducted if paid within 30 days

False

The total of a schedule of accounts payable less purchases discounts taken during the month will equal the total of accounts payable

False

A purchase of merchandise for cash would be posted

Individually to purchases

Since contra accounts are offsets to their related accounts, contra account normal balances are

Opposite the normal balances of their related accounts

An employee working with an account can trace a transaction back to the correct journal by using information in the

Post. Ref. Column

A corporation can own property, incur liabilities, and enter into contracts in its own name

True

A corporation exists independent of its owners

True

The contra account Purchases Discount has a normal debit balance

True

The periodic inventory method does not require records of the quantity and cost of individual goods

True

The petty cash account, cash short and over is a temporary account

True

The total of accounts in the accounts payable subsidiary ledger equals the balance of the controlling account, accounts payable

True

Merchandise with a list price of $1,500.00 is 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

$900.00

Articles of incorporation

A legal document that identifies basic characteristics of a corporation, which is a part of the application submitted to a state to become a corporation

Schedule of accounts payable

A listing of vendor accounts, account balances, and the total amount due to all vendors. Some businesses call this listing an accounts payable trial balance

Periodic inventory

A merchandise inventory evaluated at the end of a fiscal period

Retail merchandising business

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

A periodic inventory conducted by counting, weighing, or measuring items of merchandise on hand is called

A physical inventory

Trade discount

A reduction in the list price granted to a merchandising business

Share of stock

A unit of ownership in a corporation

Wholesale merchandising business

A business that buys and resells merchandise primarily to other merchandising businesses

Cash discount

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

Purchase order

A form requesting that a vendor sell merchandise to a business

Requisition

A form requesting the purchase of merchandise

General amount column

A journal amount column that is not headed with an account title

Special journal

A journal used to record only one kind of transaction

Supplies bought for use in a business are recorded in the

Purchases account

Credit limit

The maximum outstanding balance allowed to a customer by a vendor

Stockholder

The owner of one or more shares of stock

List price

The retail price listed in a catalog or on an internet site


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