Accounting Chapter 11
what action is required before a corporation can distribute income to its stockholders
the board of directors must declare a divided.
when is a transaction recorded in a general journal
when it doesn't fit criteria of any special journals.
credit memorandum
a form prepared by the vendor showing the amount deducted for returns and allowances
board of directors
a group of people elected by stockholders to govern a corporation
retained earnings
an amount earned by a corporation and not yet distributed to stockholders
why is only one account maintained for the investment of all owners of a corporation
because it is practical. A lot of people may be invested in a large corporation rather than having individual owners equity for each stockholder.
Why are sales returns and allowances not debited to the Sales account?
because sales returns and allowances are contra accounts to sales. It is not directly deducted from sales.
purchases allowance
credit allowed for part of the purchase price of merchandise that is not returned resulting in a decrease in the customers account payable to the vendor
sales return
credit allowed to a customer for the sales price of returned merchandises resulting in a decrease in the accounts receivable of the merchandising business
what is a primary difference between purchases return and a purchases allowance
for purchase returns, the item is returned to the seller.A purchases return is credit allowed for the purchase price of returned merchandise A purchases allowance is credit allowed for part of the purchase price of merchandise that is not returned
under what major chart of accounts division are the owners' equity accounts for a corporation normally listed
owner's equity and Stockholder's equity.
which general ledger accounts are affected and how by a sales returns and allowances transaction
accounts receivable/customer that is credited for the value return of the allowance or return including tax. Sales returns and allowances and sales tax payable are both debited for values.
declaring a dividend
action by a board of directors to distribute earnings to stockholders
when is the equality of debits and credits proved for a general journal
after each new entry is recorded in the general journal.
purchases return
credit allowed for the purchase of price of returned merchandise, resulting in decrease of 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
what is the source document for journalizing sales returns and allowances
credit memorandum
dividends
earnings distributed to stockholders
what is the difference between a sales return and a sales allowance
in a sales return, the customer returns the item and they are refunded fully for the item while sales allowances the customer keeps the item but is given a partial refund for the value of shortage or damage.
which account does a corporation use to record earning not yet distributed to stockholders
retained earnings account.
general journal
A journal with two amount columns in which all kinds of entries can be recorded
how and when do net income and dividend impact permanent stockholders equity accounts
At the end of the fiscal period, temporary accounts are closed to retained earnings. Net income increases retained earnings and dividends reduce retained earnings.
if purchases returns and allowances decrease the value of purchases, why are returns and allowances credited to a separate account
Because purchase returns and purchase allowances are credited to a separate account called purchases. Returns and allowances are a contra account to purchases with normal balance of credit. Purchase returns and Allowances are used so that businesses can keep track of purchase returns and allowances accurately.
debit memorandum
a form prepared by the customer showing the price deduction taken by the customer for return or allowance
