Accounting Chapter 10
Credit terms of 2/10, n/30 mean that if the account is paid within
10 days, a 2% discount will be allowed
The amount of cash received for a sale on account of $1,000.00 with sales tax of $80.00 when the cash is received within the 2 percent discount period is
$1,058.40
For a sale on account of $1,000.00 with sales tax of $80.00, the amount recorded in the Accounts Receivable Debit column of a sales journal is
$1,080.00
If a customer buys $300.00 worth of merchandise and the sales tax is 8%, the total bill the customer must pay is ____.
$324.00
When cash is received on account, the balance of the ____.
accounts receivable account decreases
A Schedule of Accounts Receivable is prepared
after all current entries are posted
The journal entry for a cash receipt on account is ____.
debit Cash; credit Accounts Receivable
The journal entry for a cash and credit card sales transaction is ____.
debit Cash; credit Sales; credit Sales Tax Payable
A business should post sales on account transactions to the accounts receivable subsidiary ledger frequently to
ensure each customer account will show an up-to-date balance
A sale on account transaction ____.
increases the amount to be collected later from a customer
Marris Company records a $1,000.00 sale on account on May 23. On June 6, the customer pays the account. The sale should be recorded in the
sales journal on May 23
The amount of sales tax collected is recorded in a ____.
separate liability account
When merchandise is sold on account and sales tax is also collected,
the Accounts Receivable balance is increased
When posting the Accounts Receivable Credit column total of the cash receipts journal, return to the journal and write
the account number in parentheses under the column total
The total of the schedule of accounts receivable should equal ____.
the accounts receivable account balance in the general ledger
When a credit is posted to the accounts receivable ledger
the new amount posted in the Credit column is subtracted from the previous balance
The amount of sales tax on a sale is calculated as price of goods ____.
times the sales tax rate
A sales journal is used to record both cash sales and sales on account.
False
An invoice used as a source document for recording a sale on account is a purchase invoice.
False
Cash is proved when the total of the Cash Debit column of a cash receipts journal equals the next unused check stub.
False
Separate transactions are recorded for cash, credit card, and debt card totals listed on a terminal summary.
False
The amount of sales tax collected is an asset of the business until paid to the state government.
False
The total of each general amount column of a cash receipts journal is posted to the corresponding general ledger account.
False
Very few states in the United States require collecting a tax on sales of merchandise to customers.
False
When cash is received on account, Cash is increased and Accounts Receivable is increased.
False
A sale of merchandise increases the revenue of a business.
True
A sales invoice is also referred to as a sales ticket or a sales slip.
True
A special journal used to record only cash receipts transactions is a cash receipts journal.
True
Businesses must file reports with the proper government unit and pay the amount of sales tax collected.
True
Charge customer accounts are summarized in a general ledger account titled Accounts Receivable.
True
Double lines are ruled to show that totals have been verified as correct.
True
Every business collecting a sales tax needs accurate records of the amount of total sales and total sales tax collected.
True
For weekly cash and credit card sales, the asset account Cash is debited for the total of sales and sales tax, but the revenue account Sales is credited only for the total of sales.
True
Purchases and sales of merchandise are the two major activities of a merchandising business.
True
Regardless of when payment is received, the revenue should be recorded when a sale is made, not on the date cash is received.
True
Sales Tax Payable has a normal credit balance.
True
Sales tax rates are usually stated as a percentage of sales.
True
The amount of sales tax collected is recorded in a separate liability account titled Sales Tax Payable.
True
The balance of Accounts Receivable should equal the total of the schedule of accounts receivable.
True
The sales discount is calculated by multiplying the sales invoice amount by the sales discount rate.
True
The source document for receiving cash on account is a receipt.
True
To indicate that column totals are not be posted,
a check mark is placed in parentheses under the total
The amount of sales tax a business collects is ____.
a liability
The total amount due from all charge customers is summarized in a general ledger account titled ____.
Accounts Receivable
Recording revenue from transactions at the time goods or services are sold is an application of the accounting concept ____.
Realization of Revenue