Accounting I Test 1 part 3 – Flashcards
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Multiple-step income statements show
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both gross profit and income from operations
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The arrangements between buyer and seller as to when payments for merchandise are to be made are called
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credit terms
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Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?
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administrative expense
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Net income plus operating expenses is equal to
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gross profit
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The inventory system employing accounting records that continuously disclose the amount of inventory is called
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perpetual
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The term "inventory" can indicate
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merchandise held for sale in the normal course of business
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When comparing a retail business to a service business, the financial statement that changes the most is the
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income statement
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Which of the following accounts usually has a debit balance?
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Freight In
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If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as
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FOB shipping point
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Merchandise inventory is classified on the balance sheet as a
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current asset
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If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a
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credit memo
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Generally, the revenue account for a merchandising business is entitled
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sales
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Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as
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selling expenses
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Which of the following accounts will only be found in the chart of accounts of a merchandising company?
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merchandise inventory
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Which of the following accounts has a normal credit balance?
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sales
