Accounting Terms to Know

Which line items are found on a multi-step but not on a single-step income statement. (Check all that apply.)

Gross Profit Income from Operations

Gross profit percentage is calculated as ______.

Net sales minus Cost of Goods Sold, then divide by Net sales, and multiply by 100

Deposits in transit are ______ on a bank reconciliation.

added to the bank balance

Goods Available for Sale will ______ when sold.

become Cost of Goods Sold on the income statement

Using a perpetual inventory system, the journal entry to record a sale on account will include a ______. (Check all that apply.)

credit to Inventory debit to Accounts Receivable debit to Cost of Goods Sold a credit to Sales Revenue

When using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes a ______. (Check all that apply.)

debit to Accounts Payable for the original cost credit to Inventory for the discount amount credit to Cash for the amount paid

The benefits of internal control procedures are that they ______. (Check all that apply.)

improve the efficiency and effectiveness of operations enhance the reliability of accounting information protect against theft of assets

Accounts Payable ______. (Check all that apply.)

is credited for purchases made on account is debited when amounts owed are paid

Net Sales on an income statement equals Sales Revenue ______.

minus Sales Returns, Allowances and Discounts

Which of the following duties should not be the responsibility of an employee who has access to cash? (Select all that apply.)

perform bank reconciliations record cash collected in the journal

Which of the following are elements of good internal control over cash receipts? (Select all that apply.)

Cash receipts are summarized and their total is calculated A different employee deposits the cash at the bank Two employees cannot share the same cash drawer

Which of the following reconciling items on a bank reconciliation need to be recorded in the company's record to adjust its cash balance so that it up to date? (Select all that apply.)

Interest Revenue EFT received from customers discovered on the bank statement Customer's check rejected by the bank as NSF

Acme Enterprises, which uses a perpetual inventory system, recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable. (No other accounts were affected.) What business event must have taken place? Multiple choice question.

The customer received a damaged product, but kept the product and asked for a reduction in the price.

In a bank reconciliation, the electronic funds transfer (EFT) received by the bank from a customer's note receivable owed to the company is ______.

added to the book balance

What are the two stages of accounting for a purchase discount using the gross method? (Check all that apply.)

the purchase is first recorded at full cost the inventory account is later reduced if payment is made within the discount period

Every merchandise sale has 2 components which require an entry in a perpetual inventory system. Select these two components given the sale was made on account to a customer.

Debit Accounts Receivable and credit Sales Revenue in the amount of the selling price times the quantity sold Debit Cost of Goods Sold and credit Inventory in the amount of the cost times the quantity sold

This month's bank statement includes a check from a customer that was marked NSF. How would this item be treated on the bank reconciliation?

It would be deducted from the book balance.

One of the components of an internal control system is the control environment which refers to the ______.

attitude employees hold regarding internal control

Internal control for cash is important because ______. (Check all that apply.)

of the large volume of cash transactions the risk of cash-handling errors is significant of the high risk of theft cash is portable and is "owned" by whomever possesses it

Which of the following control components are part of the framework used when analyzing an internal control system? (Check all that apply.)

risk assessment control environment monitoring activities control activities information and communication