ACC 211 Ch. 5

Expenses incurred in the administration or general operations of the business.

Administrative expenses

Expenses that are incurred directly in the selling of merchandise.

Selling expenses

T/F An inventory subsidiary ledger is used in a perpetual inventory system

True

This form of the balance sheet may be presented with assets on the left-hand side and the liabilities and stockholders' equity on the right-hand side.

account form

amounts owed to various creditors would be credited/debited to which account?

accounts payable

lists individual creditor accounts in alphabetical order

accounts payable subsidiary ledger

amounts due from various customers would be credited/debited to which account?

accounts receivable

lists the individual customer accounts in alphabetical order

accounts receivable subsidiary ledger

the amount of cash expected by a seller depends on all of the following execpt

advertising expense

the ratio of net sales to assets is calculated by dividing net sales by

average total assets

The ending merchandise inventory is determined by a physical count under __________

both systems

each subsidiary ledger is represented in the general ledger by a summarizing account called

controlling account

the sum of the balances of the accounts in the subsidiary ledger must equal the balance of the related

controlling account

when merchandise is sold the cost is recognized as an expense known as ___________________

cost of merchandise sold

amount of time allotted to the buyer to pay invoice

credit period

terms for when payments for merchandise are to be made are called

credit terms

accounts payable subsidiary ledger is also called

creditors ledger

the current classification of merchandise inventory on the balance sheet is as a

current asset

accounts receivable subsidiary ledger is also called

customers ledger

When the seller pays the delivery charges, the seller Delivery Expense or Freight Out.

debits

In a Perpetual inventory system:

each purchase and sale of merchandise is recorded in the inventory account and related subsidiary ledger

On the income statement for a service business, the revenues from services are reported as _______ _______

fees earned

primary ledger, which contains all of the balance sheet and income accounts is called

general ledger

the difference between the revenues and cost of merchandise sold is referred to as the

gross profit

if a company has a ratio of sales to assets of 2.20 in 2011 and 2.30 in 2012, you can most likely assume that the company has

improved the utilization of its assets to generate sales in 2012

___________ _______ _________ is determined by subtracting operating expenses from gross profit.

income from operations

inventory subsidiary ledger is also called

inventory ledger

The amount by which the merchandise for sale, as indicated by the balance of the merchandise inventory account, is larger than the total amount of merchandise counted during the physical inventory.

inventory shrinkage

The adjusting process is the same under the periodic and perpetual inventory systems except for the ________________________

inventory shrinkage adjustment

lists individual inventory by item number or bar code.

inventory subsidiary ledger

terms of purchases on account are normally indicated on the

invoice or bill

merchandise on hand at the end of an accounting period is called

merchandise inventory

A form of income statement that contains several sections, subsections, and subtotals.

multiple-step income statement

The operating expenses for a service business incurred in providing the services are subtracted from the fees earned to arrive at _____ ______

net income

An expense that cannot be traced directly to the normal operations of the business.

other expense

Revenue from sources other than the primary operating activity of a business.

other income

Most merchandise companies use computerized _______ inventory systems

perpetual

a listing of inventory on hand is called

physical inventory

__________ measures how effectively a company uses its assets to generate sales, computed as net sales divided by average total assets.

ratio of net sales to assets

This form of the balance sheet presented in a downward sequence with the liabilities and stockholders' equity sections below the assets section.

report form

the charts of accounts for a merchandising business generally

requires different accounts than a service business

When this merchandise is sold from a merchandising business, the revenue is reported as _____, and its cost is recognized as an ________.

sales ; expense

generally, amounts paid by a purchaser for merch. do not include

seller's rent

Delivery Expense is reported on the seller's income statement as a _______ _________

selling expense

A form of income statement in which the total of all expenses is deducted in one step from the total of all revenues.

single-step income statement

a large number of individual accounts with a common characteristic can be grouped together inn a separate ledger called

subsidiary ledger

FOB shipping point

the buyer pays the freight costs from the shipping point to the final destination.

In a periodic inventory system:

the inventory does not show the amount of merchandise available for sale and the amount sold

a major disadvantage of the periodic inventory system is

the inventory shrinkage is not separately determined

FOB destination

the seller pays the freight costs from the shipping point to the buyer's final destination.

report form

this form of a balance sheet reports asset, liabilities, and SE in downward sequence

Discounts from the list prices in published catalogs or special discounts offered to certain classes of buyers

trade discounts

T/F a subsidiary ledger is a secondary ledger that supports a controlling account in the general ledger

true