account test 4

Which of the following credit terms allows a discount of 3% if payment is made within 15 days from the date of the invoice; otherwise, the total amount of the invoice must be paid within 30 days from its date?

3/15, n/30

Merchandise is sold on account for $90, and the sale is subject to a retail sales tax of $6.40. The amount that should be added to Accounts Receivable would be

96.40

Which of the following accounts is NOT used to account for merchandise sales transactions?

accounts payable

A record used to keep the amount owed to each supplier is called a(n)

accounts payable ledger

A discount offered as an inducement for prompt payment of an invoice is called a(n)

cash discount

For the merchant, bank credit card sales are treated in a manner similar to

cash sales

A summary accounts receivable account is called a(n)

controlling account

Merchandise inventory available at the beginning of the period plus cost of goods purchased minus merchandise inventory at the end of the period equals

cost of goods sold

An invoice is never subject to both trade and cash discounts.

false

For the merchant, bank credit card sales are nothing like cash sales.

false

If the terms specified on an invoice are 2/10, n/30, this means that a discount of 2% will be allowed if payment is made within 30 days from the date of the invoice.

false

Major documents used in the purchasing process are the purchase requisition, purchase order, receiving report, and sales invoice.

false

Net sales less sales returns and allowances and sales discounts equal gross sales.

false

Postings to the accounts payable ledger should be made at the end of the month only.

false

Reductions in the price of merchandise granted by the seller because of defects or other problems with the merchandise are called merchandise sales.

false

Sales Returns and Allowances is debited for the selling price, including sales tax, of any merchandise returned by customers

false

Special discounts on list prices granted to different classes of customers are known as trade discounts.

false

The first step in the purchasing process involves preparing a purchase order.

false

To verify that the sum of the accounts receivable ledger balances equals the Accounts Receivable balance, a schedule of accounts payable is prepared.

false

When a business uses a subsidiary accounts receivable ledger, there is no need to keep an accounts receivable account in the general ledger.

false

The account to which transportation charges on incoming merchandise are generally entered is

freight-in

A schedule of accounts receivable is prepared from the

list of customer accounts in the accounts receivable ledger

A schedule of accounts receivable is normally prepared

monthly

The cost of merchandise purchased during the period less any discounts granted by suppliers and amounts returned to suppliers and amounts of any allowances made by suppliers is called

net purchases

Total sales less the sales price of any goods returned by customers, less any reduction in price given to customers, less cash discounts allowed by the seller, is called

net sales

A written order by a buyer for merchandise or other property specified in a purchase requisition is known as a

purchase order

The account in which the revenue earned from the sale of merchandise is entered is

sales

A source document prepared by the seller that lists the items shipped, their cost, and the method of shipment is commonly referred to by the seller as the

sales invoice

The account that would be credited for the amount of tax collected and paid on sales would be

sales tax payable

The source document of a sales transaction is called a

sales ticket

A list showing the amount due to each supplier as of a specified date is known as the

schedule of accounts payable

A common approach to keeping a record of each customer's accounts receivable is to use a

subsidiary accounts receivable ledger

Special discounts from list prices, granted by manufacturers to different classes of customers, are known as

trade-discounts

A retail business allows customers to enter the store, select the merchandise they want, and bring it to a sales clerk.

true

A sales ticket is a document created as evidence of a sale in a retail business.

true

After the posting of the accounts payable ledger and the general ledger is completed, the total of the accounts payable ledger balances should equal the Accounts Payable balance in the general ledger.

true

After the posting of the accounts receivable ledger and the general ledger is completed, the total of the accounts receivable ledger balances should equal the Accounts Receivable balance in the general ledger.

true

Discounts from quoted prices which are contingent on prompt payment of invoices, within a stated discount period, are called cash discounts.

true

For merchandising businesses, the term "purchases" refers only to merchandise acquired for resale.

true

Gross profit is a measure of the amount of sales dollars available to cover expenses after covering the cost of the goods sold.

true

If any merchandise has been returned, the sales discount is calculated on the net sales amount.

true

If the merchandise received is damaged or unsatisfactory, an adjustment may be made that is referred to as an allowance

true

In entering in the books an invoice that involves a trade discount, the amount to be used is the net amount after the trade discount is subtracted.

true

Purchases Returns and Allowances is the contra-purchases account to which purchases returns and purchases allowances are credited.

true

Sales made on account normally lead to cash receipts.

true

The accounts receivable ledger is simply a detailed listing of the same information that is summarized in Accounts Receivable in the general ledger.

true

The supplier or vendor is the person or firm from whom the merchandise or other property is ordered.

true

To verify that the sum of the accounts receivable ledger balances equals the Accounts Receivable balance, a schedule of accounts receivable is prepared.

true

When the merchandise is received, a receiving report indicating what has been received is prepared.

true

While sales returns and allowances can be debited directly to the sales account, it is better to debit a separate sales returns and allowances account.

true