Accounting Chapter 11

Debit Memorandum

A form prepared by the customer showing the price deduction taken by the customer for a return or an allowance

Credit Memorandum

A form prepared by the vendor showing the amount deducted for returns and allowances

Board of Directors

A group of persons elected by the stockholders to govern a corporation

General Journal

A journal with two amount columns in which all kinds of entries can be recorded

Declaring a Dividend

Action by a board of directors to distribute corporate earnings to stockholders

Retained Earnings

An amount earned by a corporation and not yet distributed to stockholders

Purchases Allowance

Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease of the customer's account payable to the vendor

Purchases Return

Credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer's account payable to the vendor

Sales Allowance

Credit allowed to a customer for part of the sales price of merchandise that is not returned, resulting in a decrease in the accounts receivable of the merchandising business

Sales Return

Credit allowed to a customer for the sales price of returned merchandise, resulting in a decrease in the accounts receivable of the merchandising business

Dividends

Earnings distributed to stockholders

Credit allowed for part of the purchase price of merchandise that is not returned results in an increase in the customer's account

False; a decrease in the account

Dividends can be distributed to stockholders only by formal action if a corporation's chief financial officer

False; board of directors

The normal account balance of Purchases Returns and Allowances is a debit

False; credit

A corporation's Dividends account is a permanent account similar it a proprietorship's drawing account

False; temporary account

Paid cash for quarterly dividend declared December 15

Journal: Cash Payments Journal Debit: Dividends Payable Credit: Cash

Returned merchandise to Yeats Corporation

Journal: General Journal Debit: Accounts Payable/ Years Corporation Credit: Purchases Returns and Allowances

The board of directors declared a quarterly dividend

Journal: General Journal Debit: Dividend Credit: Dividends Payable

Granted credit to Tim Thornton for merchandise returned, plus sales tax

Journal: General Journal Debit: Sales Returns and Allowances/ Sales Tax Payable Credit: Tim Thornton/ Accounts Receivable

Bought office supplies on account from Walton Supply

Journal: General Journal Debit: Supplies- Office Credit: Accounts Payable/ Walton Supply

A completed general journal page should always be reviewed to be sure that all postings have been made

True

A credit memorandum issued by a vendor results in the vendor recording a credit to the customer's account

True

A debit memorandum prepared by a customer results in the customer recording a debit to the vendor account

True

A general journal entry posted to Accounts Payable will also be posted to a subsidiary ledger account

True

A sales return that credits the customer's account is not recorded in a cash receipts journal because the transaction does not involve cash

True

All corporations are not required to declare dividends

True

An entry in the general journal that affects Accounts Payable also affects a vendor's account in the accounts payable ledger

True

An entry recorded in a general ledger either increase or decrease the accounts affected by the entry

True

Entries in the general journal affect account balances in general and subsidiary ledger accounts

True

In a computerized accounting system, transactions recorded in a general journal are posted immediately after they are entered

True

Most corporations pay a dividend by writing a single check to an agent, such as a bank, that distributes checks to individual stockholders

True

Net income increases a corporation's total stockholder's equity

True

The correcting entry to correct a sale on account recorded to the wrong customer in ether sales journal involves only subsidiary ledger accounts

True

The normal account balance of Sales Returns and Allowances is a debit

True

The stockholders' equity account, Dividends, has a normal debit balance

True

Transactions that cannot be recorded in a special journal are recorded in a general journal

True