ch 5 merchandise business financial accounting

Common subsidiary ledgers are: The ________ _________subsidiary ledger, or customers ledger, lists the individual customer accounts in alphabetical order. The controlling account in the general ledger is Accounts Receivable.

Accounts receivable

These terms are expressed as , and are read as 2/10 n/30 and are read as

" 2%discount if paid within 10 days , net amount due within 30 days ."

The terms for when payments for merchandise are to be made are called the credit terms. If payment is required on delivery, the terms are ____ or ___ ____.

cash or net cash

The sum of the balances of the accounts in the subsidiary ledger must equal the balance of the related controlling account. Thus, a subsidiary ledger is a secondary ledger that supports a ___________ account in the general ledger.

controlling account

Discounts taken by the buyer for early payment of an invoice are called purchases discounts. Purchases discounts taken by a buyer reduce the ___ of the merchandise purchased.

cost

The terms for when payments for merchandise are to be made are called the credit terms. If payment is required on delivery, the terms are cash or net cash. Otherwise, the buyer is allowed an amount of time, known as the ______ ______, in which to pay

credit period

The terms for when payments for merchandise are to be made are called the ______ _____.

credit terms

The _________ __________ledger, or inventory ledger, lists individual inventory by item (bar code) number. The controlling account in the general ledger is Inventory. An inventory subsidiary ledger is used in a perpetual inventory system.

inventory subsidiary

The buyer may use the debit memo as the basis for recording the return or allowance or wait for approval from the seller (creditor). In either case, the buyer debits Accounts Payable and credits pg 218

merchandise inventory

Under the perpetual inventory system, the buyer initially debits Merchandise Inventory for the amount of the invoice. When paying the invoice within the discount period, the buyer credits __________ ________for the amount of the discount. In this way, Merchandise Inventory shows the net cost to the buyer.

merchandise inventory

if payment is due within a stated number of days after the invoice date, such as , the terms are net . These terms may be written as

n/30

Using the perpetual inventory system, the cost of merchandise sold and the decrease in merchandise inventory are also recorded. In this way, the merchandise inventory account indicates the amount of merchandise __ ____ (not sold)

on hand not sold

In a ________ inventory system, the inventory does not show the amount of merchandise available for sale and the amount sold. Instead, a listing of inventory on hand, called a physical inventory, is prepared at the end of the accounting period. This physical inventory is used to determine the cost of merchandise on hand at the end of the period and the cost of merchandise sold during the period.

periodic

In a _________ inventory system, each purchase and sale of merchandise is recorded in the inventory account and related subsidiary ledger. In this way, the amount of merchandise available for sale and the amount sold are continuously (perpetually) updated in the inventory records

perpetual

The inventory subsidiary ledger, or inventory ledger, lists individual inventory by item (bar code) number. The controlling account in the general ledger is Inventory. An inventory subsidiary ledger is used in a __________ inventory system.

perpetual

There are two systems for accounting for merchandise transactions

perpetual and periodic

In a periodic inventory system, the inventory does not show the amount of merchandise available for sale and the amount sold. Instead, a listing of inventory on hand, called a ________ ______, is prepared at the end of the accounting period. This _________ _________ is used to determine the cost of merchandise on hand at the end of the period and the cost of merchandise sold during the period.

physical inventory

Discounts taken by the buyer for early payment of an invoice are called _________ ________

purchase discounts

A buyer may request an allowance for merchandise that is returned (purchases return) or a price allowance (purchases allowance) for damaged or defective merchandise. From a buyer's perspective, such returns and allowances are called

purchase returns and allowances

The terms for when payments for merchandise are to be made are called the credit terms. If payment is required on delivery, the terms are cash or net cash. Otherwise, the buyer is allowed an amount of time, known as the credit period, in which to pay. The credit period usually begins with the date of the ____ as shown on the invoice.

sale

Revenue from merchandise sales is usually recorded as Sales. Sometimes a business may use the title Sales of _________.

sales of merchandise

Most merchandising companies also use computerized accounting systems that record similar transactions in separate journals, which generate purchase, sales, and inventory reports. These separate journals are called

special journals

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

subsidiary ledger

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

controlling account

A _____ memorandum, often called a _____ memo, is shown in Exhibit 3. A _____ memo informs the seller of the amount the buyer proposes to _____ to the account payable due the seller. It also states the reasons for the return or the request for the price allowance.

debit

In both cases, the buyer normally sends the seller a _____ memorandum to notify the seller of reasons for the return (purchase return) or to request a price reduction (purchase allowance).

debit

cash sales pg 219

debit cash credit sales

Merchandise transactions are recorded in the accounts, using the rules of

debits and credits chapter 2

To encourage the buyer to pay before the end of the credit period, the seller may offer a ________.

discount

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

general ledger

If payment is due by the end of the month in which the sale was made, the terms are written as

n/eom

Any discount terms would not apply to the prepaid freight. T/f prepaid freight on page 224

true

The credit period usually begins with the date of the sale as shown on the invoice. t/f

true

The ownership of the merchandise may pass to the buyer when the buyer receives the merchandise. In this case, the terms are said to be FOB (free on board) __________. This term means that the seller pays the freight costs from the shipping point to the buyer's final destination. When the seller pays the delivery charges, the seller debits _________ _______ or Freight Out. _______ _______is reported on the seller's income statement as a selling expense. pg223

FOB destination, delivery expense or freight out x2

To encourage the buyer to pay before the end of the credit period, the seller may offer a discount. For example, a seller may offer a discount if the buyer pays within of the invoice date. If the buyer does not take the discount, the total invoice amount is due within . These terms are expressed as

2/20 n/30

The ownership of the merchandise may pass to the buyer when the seller delivers the merchandise to the freight carrier. In this case, the terms are said to be ___ ________ _____. This term means that the buyer pays the freight costs from the shipping point to the final destination. Such costs are part of the buyer's total cost of purchasing inventory and are added to the cost of the inventory by debiting __________ _________. pg222-223

FOB (free on board) Shipping point, Merchandise inventory

A debit memorandum, often called a debit memo, is shown in Exhibit 3. A debit memo informs the seller of the amount the buyer proposes to debit to the _______ _______ due the seller. It also states the reasons for the return or the request for the price allowance. pg217

account payable

The ________ _______ subsidiary ledger, or creditors ledger, lists individual creditor accounts in alphabetical order. The controlling account in the general ledger is Accounts Payable.

accounts payable