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