Accounting Chapter 9 Study Guide – Flashcards

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True or False: Unlike a proprietorship, a corporation exists independent of its owners
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True
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True or False: A corporation can incur liabilities but cannot own property
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False
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True or False: As in proprietorship, information in a corporation's accounting system is kept separate from the personal records of the owners, and this account concept application is called a Business Entity
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True
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True or False: The selling price of merchandise must be greater than the cost of merchandise for a business to make a profit
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True
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True or False: The cost account Purchases is used only to record the value of merchandise purchased
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True
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True or False: When purchases are recorded at their cost, including any related shipping costs and taxes, the Historical Cost accounting concept is being applied
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True
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True or False: Recording entries in a journal with special amount columns saves time
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True
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True or False: All purchase transactions, including purchases made on account and purchases made for cash, are recorded in the purchases journal
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False
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True or False: The course document for recording a purchase on account transaction is a memorandum describing the merchandise purchased
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False
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True or False: By listing the quantity, the description, the price of each item, and the total amount purchased, the Objective Evidence concept is applied
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True
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True or False: A purchase invoice usually lists only the total cost of the merchandise
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False
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True or False: A purchase on account transaction increases the amount owed to a vendor
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True
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True or False: A cash payment journal includes a special amount account for the cash account and the accounts payable account
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True
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True or False: The source document for the most cash payments is the check issued
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True
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True or False: When supplies are purchased for use in the business, the amount is recorded purchases account
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False
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True or False: A special journal entry is made to show the amount of a trade discount
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False
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True or False: A term of sale 2/15, n/30 mean that 2% of the invoice amount may be deducted if paid within 15 days of the invoice date or the total invoice amount must be paid within 30 days
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True
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True or False: Purchase discounts are recorded in the general journal
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False
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True or False: the contra account Purchases Discount has a normal credit balance
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True
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True or False: The custodian prepares a petty cash report when the petty cash fund is to be replenished
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True
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True or False: The petty cash account cash Short and Over is a permanent account
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False
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True or False: A journal is proved and ruled only at the end of a fiscal period
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False
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True or False: To begin a new journal page, the totals from the previous journal page are carried forward to the next journal page
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True
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True or False: Buying supplies on account is recorded in the general journal
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True
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True or False: When store supplies are purchased on account, the Store Supplies account balance increases and the Accounts Payable account balance increases
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True
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True or False: The source document for purchases return is a check
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False
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True or False: The normal account balance of Purchases Returns and Allowances is a credit
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True
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True or False: The purchases account is increased by a credit and decreased by a debit
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False
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True or False: When several journals are used, an abbreviation is used in the Post. Ref. column of a ledger o show the journal from which the posting is made
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True
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True or False: Trade discounts normally are recorded in the purchases discount account
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False
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True or False: Purchases Discount is increased by a credit entity
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True
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True or False: If the actual petty cash on hand is $53.00 but the records show that $55.00 should be on hand, the petty cash fund is said to be over
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False
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True or False: Purchases Returns and Allowances is a contra account to Cost of Merchandise
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False
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True or False: The terms of sale 1/10, n/30 mean that the customer may deduct 1% of the invoice amount if payment is made within 30 days of the invoice date
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False
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