Accounting General Journal, 9E: Chapter 09 – Flashcards

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capital stock
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total shares of ownership in a corporation
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cash discount
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a deduction that a vendor allows on the invoice amount to encourage prompt payment
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cash over
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a petty cash on hand amount that is more than a recorded amount
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cash payments journal
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a special journal used to record only cash payment transactions
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cash short
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a petty cash on hand amount that is less than a recorded amount
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contra account
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an account that reduces a related account on a financial statement
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corporation
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an organization with the legal rights of a person and which many persons may own
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cost of merchandise
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the price a business pays for goods it purchases to sell
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debit memorandum
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a form prepared by the customer showing the price deduction taken by the customer for returns and allowances
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general amount column
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a journal amount column that is not headed with an account title
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list price
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the retail price listed in a catalog or on an Internet site
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markup
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the amount added to the cost of merchandise to establish the selling price
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merchandise
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goods that a business purchases to sell
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merchandising business
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a business that purchases and sells goods
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purchase invoice
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an invoice used as a source document for recording a purchase on account transaction
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purchase on account
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a transaction in which the merchandise purchased is to be paid for later
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purchases allowance
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credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer's accounts payable
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purchases discount
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a cash discount on purchases taken by a customer
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purchases journal
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a special journal used to record only purchases of merchandise on account
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purchases return
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credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer's accounts payable
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retail merchandising business
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a merchandising business that sells to those who use or consume the goods
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share of stock
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each unit of ownership in a corporation
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special amount column
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a journal amount column headed with an account title
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special journal
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a journal used to record only one kind of transaction
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stockholder
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an owner of one or more shares of a corporation
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terms of sale
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an agreement between a buyer and a seller about payment for merchandise
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trade discount
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a reduction in the list price granted to customers
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vendor
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a business from which merchandise is purchased or supplies or other assets are bought
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wholesale merchandising business
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a business that buys and resells merchandise to retail merchandising businesses
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What kinds of transactions are recorded in a purchase journal?
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Purchases of merchandise on account
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For what are special amount columns in a journal used?
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Frequently occurring transactions
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Why are there two account titles in the amount column of the purchases journal?
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Because the same two account are always affected by purchases on account transactions.
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What is the advantage of having special amount columns in a journal?
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Time is saved because using special amount columns eliminates writing an account title in the Account Title column.
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Why would a vendor offer a cash discount to a customer?
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To encourage early payment
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What is recorded in the general amount columns of the cash payments journal?
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Cash payments transactions that do not occur often
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What is the difference between purchasing merchandise and buying supplies?
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A business purchases merchandise to sell but buys supplies for use in the business. Supplies are not intended for sale.
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What is meant by terms of sale 2/10, n/30?
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Two ten means 2% of the invoice amount may be deducted if the invoice is paid within 10 days of the invoice date. Net thirty means that the total invoice amount must be paid within 30 days.
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When journalizing a cash payment to replenish petty cash, what is entered in the Account Title column of the cash payments journal?
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The titles of the accounts for which the petty cash fund was used.
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What is the usual balance of the account Cash Short and Over?
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The balance is usually a debit because the petty cash fund is more likely to be short than over.
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List the five steps for ruling a cash payments journal at the end of the month.
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a. Rule a single line across all amount columns. b. Write the date in the Date column. c. Write Totals in the Account Title column. d. Write each column total below the single line. e. Rule a double line across all amount columns.
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What journal is used to record transactions that cannot be recorded in special journals?
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General Journal
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Why is a memorandum used as the source document when supplies are bought on account?
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To note the invoice is for store supplies and not for purchase, ensuring that no mistake is made.
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Why are two account titles written for the credit amount when supplies are bought on account?
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Because the single credit amount is posted to two accounts.
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When is the equality of debits and credits proved for a general journal?
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After each general journal entry is recorded.
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If purchases returns and allowances are a decrease in purchases, why are returns and allowances credited to a separate account?
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A business can track the amount or purchases returns and allowances in a fiscal period if a separate account is used.
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What is a primary difference between a purchase returns and a purchases allowance?
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A purchase 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.
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When is a debit memorandum a proper source document for a purchases return or allowance?
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When the customer want to record the transaction immediately, without waiting for written confirmation from the vendor.
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