Accounting Ch. 7 & 8 test

The purchases account is...

A temporary account

Sales allowances

Reduction from the original price due to damage or being defective

Purchase Allowance

Reduction of price for damaged or defective material

Which of the following accounts is credited when recording the portion of sales tax the government permits the retailer to keep?

miscellaneous income

non-bank credit cards

American Express and Diners Club- use A/R wait to put in credit card fee until payment is made

What is a Merchandising Business?

Business that sells products as either a wholesaler or retailer

Sales Discounts

Cannot take a discount on sales tax - ONLY on the cost of the merchandise purchased

Bank credit cards

Cards issued by credit card companies (MC and Visa) - Treated as Cash, but may involve credit card charges to the business

Which of the following is a common example of the distribution channel?

Manufacturer sells to wholesaler who sells to retailer who sells to customer

What are the three basic types of businesses

Manufacturing, Merchandising, Service

A company that earns incoming by buying merchandise then reselling it to customers in the same condition in which it was purchased in is a ......

Merchandising business

Perpetual Inventory system

Require a point of sale system (register) continually updating inventory records, uses an account called merchandise inventory & an account called cost of goods sold.

Periodic Inventory system

Requires a physical count of inventory to determine inventory on hand and cost of goods sold. used mostly by smaller businesses

Open-account credit

These are accounted for as sales on credit

Why would supplier offer a sales discount to a customer?

To encourage quick payment by customers

Which of the following is prepared to show the quantity and condition of the goods received upon arrival?

receiving report

Purchase Discounts

Contra expense account

Purchases Returns and Allowances

Contra expense account

Sales Returns and Allowances

Contra revenue account

Which of the following is a business form that is used to credit customers account upon acceptance of the return of previously purchased goods?

Credit memorandum

The entry to record a purchase allowance granted on a credit memo includes a debit to which account in the general ledger?

Accounts payable

FOB Shipping Point

Buyer assumes responsibility and cost of transportation; ownership changes hands once loaded at the Seller's location; May pay transport company directly or reimburse Seller shipping charges - in this case make sure to add the amount owed to the A/P and record the expense as Freight -In

Purchase Returns

Buyer returns goods

Sales discounts

Contra revenue account

Sales tax payable

Liability

Sales

Revenue

A ledger that contains accounts of a single type is called...

subsidiary ledger

Which of the following contains accounts for credit customers

Accounts receivable

Credit card expense

Expense

Freight In

Expense account

Purchases

Expense account

The amount of the purchases for a period is presented in....

The cost of goods sold section of the income statement.

The amount of the purchases for a period is presented in.....

The cost of goods sold section of the income statement.

Reporting Net Purchases

Purchases + Frieght In = Delivered cost of purchases - Purchase returns and allowances - Purchase discounts = Net delivered of purchases

Assuming a periodic inventory system is used, which of the following is deducted from Purchases to determine the net delivered cost of purchases?

Purchases discounts

Assuming a periodic inventory system is used, purchases returns and allowances are recorded in the general journal as a debit to Accounts Payable and a credit to....?

Purchases returns and allowances

Which of the following statements is correct?

Purchases should be made only after receiving proper written authorization.

Business credit cards

Sales on credit

All the following are other names for "sales slips" that are used in credit card transactions except?

Sales returns.

Sales Returns

Seller accepts return of physical goods

FOB Destination

Seller assumes responsibility and cost of transportation; ownership changes hands at Buyer's location (Freight Out or Delivery Expense)

PURCHASING PROCEDURES: Control of Purchases:

1.Purchase Requisition - Request to Purchase 2.Purchase Order - Purchasing sends to Supplier; Purchasing keeps 1; Dept issued Requisition; Accounting, Receiving 3.Receiving Report 4.Invoice - Sent from Seller 5.Separate person to write the check

When an accounts payable subsidiary ledger is used, the Accounts Payable account in the general ledger becomes a(n)

control account

All of the following situations can cause A/R to become noncollectable except.....

efficient business practices

The source document for recording a purchase of merchandise on credit is.......

the purchase invoice