Accounting Chapter 7

Draw a diagram showing the relationship between the accounts receivable ledger, the schedule of accounts receivable, and the general ledger.

(accounts receivable ledger) transfer individual balances to -------------------> (schedule of accounts) total should equal ---------------------------> (accounts receivable balance to general ledger)

what account is used to record sales tax owned by a business to a city or a state?

sales tax payable

What is a special journal? Four examples:

a journal that is used to record only one type of transaction. ex: sales journal, purchases journal, cash receipts journal, cash payments journal

What is a subsidiary ledger? two example:

a ledger contains accounts of a single type. ex: accounts receivable ledger and accounts payable ledger

which of the following general ledger accounts would appear in a sales returns and allowances journal?

a. Sales returns and allowances, sales tax payable, accounts receivable

A company that buys 4000 of goods from a wholesaler offering trade discounts of 20 and 10 percent will pay what amount for the goods?

c. 2880

where would you report net sales?

c. income statement

Which of the following is not a reason to use a sales journal?

c. increase credit sales

Types of business operations are:

c. service, merchandising, manufacturing

if a wholesome business offers a trade discount of 35 percent on a sale of 7200, what is the amount of the discount?

d. 2520

which accounts are kept in the accounts receivable ledger?

individual accounts for all credit customers

what is the difference between list price and net price?

list price is the established retail price of an item net price is the amount left after all trade discounts are subtracted from the list price

what are the four types of credit sales?

open account credit, business credit card sales, bank credit card sales, and credit card company sales

what factors would you consider in deciding whether or not to extend credit to a customer?

payment history, amount of current debt, amount of potential debt, employment history, salary, references from other creditors

what are net sales?

sales minus sales returns and allowances

What type of transaction is recorded in the sales journal?

sales of merchandise on credit

what is a sales return? what is a sales allowance?

sales return results when a customer returns goods and the firm takes them back sales allowance results when a firm gives the customer a reduction in the price of the good or service

All sales recorded in the sales journal below were made on account and are taxable at a rate of 8 percent. What errors have been made in the entries?

the sale to Harris was recorded at a tax rate of 7 percent instead of 8 percent. the sales tax payable column should have an entry of $48 not $42. the accounts receivable debit column should have an entry of $648 not $642 the sale to wells should have an entry in the accounts receivable debit column of $972 not $872