Chapter 5 True and False
A discount offered the purchaser of goods as a means of encouraging payment before the end of the credit period is known as a bank discount.
False
After the adjusting and closing entries have been recorded and posted, the general ledger accounts that appear on the balance sheet have no balances
False
Any merchandise inventory shrinkage is normally debited to the merchandise inventory account.
False
Expenses incurred directly and entirely in connection with the sale of merchandise are called administrative expenses
False
If the seller is to absorb the cost of delivering the goods, the terms are stated FOB (free on board) shipping point
False
In a perpetual inventory system, purchases of merchandise are recorded in the purchases account
False
Revenue from sources such as income from interest, rent, dividends, and gains resulting from the sale of fixed assets is classified as income from operations
False
The accounting cycle for a merchandising business is significantly different from that of a service business
False
The liability for the sales tax is incurred at the time the seller receives payment form the buyer
False
The physical inventory taken at the end of the period is normally larger than the amount of the balance of the merchandise inventory account
False
The traditional balance sheet arrangement of assets on the left-hand side iwth the liabilities and stockholders' equity on the right-hand side is called the report form
False
Credit terms of "2/10, n/30" mean that the buyer may deduct 2% of the amount of the invoice if payment is made within 10 days of the invoice date.
True
Gross profit is not calculated in the single-step form of income statement
True
In a periodic inventory system, no attempt is made to record the cost of merchandise sold at the date of the sale
True
The chart of accounts for a merchandising business will differ from that of a service business
True
The closing entries are recorded in the journal immediately following the adjusting entries
True
The excess of gross profit over total operating expenses is called income from operations
True
The purchases returns and allowances are credited to Merchandise Inventory
True
The single-step form of income statement has the advantage of being simple, and it emphasizes total revenues and total expenses as the factors that determine net income
True
The two main systems for accounting for merchandise held for sale are called periodic and perpetual
True
