Accounting I Study Guide Chapter 9 – Flashcards
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Merchandise
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Goods that a business purchases in order to sell
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Merchandising Business
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A business that purchases and resells goods
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Retail Merchandising Business
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A merchandising business that sells to those who use or consume goods
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Wholesale Merchandising Business
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A business that buys and resells merchandise primarily to other merchandising businesses
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Corporation
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An organization with the legal rights of a person which many persons or other corporations may own
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Capital
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The assets or financial resources available to a business
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Share of Stock
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Each unit of ownership in a coperation
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Stockholder
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The owner of one or more share of stock
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Capital Stock
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The total shares of ownership in a corporation
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Articles of Incorporation
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A legal document that identifies basic characteristics of a corporation
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Charter
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The legal rights for a business to conduct operations as a corporation
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Vendor
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A business from which merchandise, supplies, or other assets are purchased
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Subsidiary Ledger
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A ledger that is summarized in a single general ledger account
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Accounts Payable Ledger
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A subsidiary ledger containing vendor accounts
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Controlling Account
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An account in a general ledger that summarizes all accounts in a subsidiary ledger
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Inventory
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A list of assets, usually containing the value of individual items
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Merchandise Inventory
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The goods a business has on hand for sale to customers
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Perpetual Inventory
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An inventory determined by keeping a continuous record of increases, decreases, and the balance on hand of each item of merchandise
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Periodic Inventory
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A merchandise inventory evaluated at the end of a fiscal period
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Physical Inventory
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When a periodic inventory is conducted by counting, weighing, or measuring items of merchandise on hand
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Cost of Merchandise
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The amount a business pays for goods it purchases to sell
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Requsition
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A form requesting the purchase of merchandise
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Purchase Order
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A form requesting that a vendor sell merchandise to a business
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Special Journal
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A journal used to record only one kind of transaction
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Purchase on Account
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A transaction in which the items purchased are to be paid for later
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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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Special Amount Column
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A journal amount column headed with an account title
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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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Terms of Sale
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An agreement between a buyer and a seller about payment for merchandise
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Due Date
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The date by which an invoice must be paid
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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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List Price
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The retail price listed in a catalog or on an Internet site
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Trade Discount
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A reduction in the list price granted to a merchandising business
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Net Price
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The price after the trade discount has been deducted from the list price
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Cash Discount
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A deduction that a vendor allows on an invoice amount to encourage prompt payment
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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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Discount Period
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The period of time during which a customer may take a cash discount
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Purchases Discount
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When a company that has purchased merchandise on account takes a cash discount
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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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Credit Limit
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The maximum outstanding balance allowed to a customer by a vendor
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Schedule of Accounts Payable
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A listing of vendor accounts, account balances, and the total amount due to all vendors
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A corporation can incur liabilities but cannot own property.
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False; a corporation can both incur liabilities and own land.
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The articles of incorporation typically include the name and address of the business, it's purpose for operating, any limitations on its activities and rules for dissolving the corporation.
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True
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Unlike a proprietorship, a corporation exists independent of its owners.
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True
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The total of accounts in the accounts payable ledger equals the balance of the controlling account, Accounts Payable.
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True
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The accounts payable ledger form contains the same columns as the general ledger except that it lacks a Debit Balance column.
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True
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When a perpetual inventory system is used, purchases of merchandise are accounted for directly to Merchandise Inventory.
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True
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The perpetual inventory is not easier to maintain then the periodic method. The perpetual method requires records of the quantity and. Cost of individual goods.
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True
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When a periodic inventory system is used, the cost of merchandise is recorded to Purchases.
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True
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The income statement of a merchandising business places Purchases in a section titled Cost of Goods Sold, separate from other expenses.
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True
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A purchase invoice lists the quantity, the description, and the price of each item and shows the total amount of the purchase.
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True
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A transaction to record merchandise purchased with a trade discount would include a credit to Merchandise Discount.
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False; a credit would be made to Purchase Discount.
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When journalizing a cash payment for advertising expense, the vendor's name is not written in the Account Title column of the cash payments journal.
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True
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When supplies are purchased for use in the business, the amount is recorded as a debit to Purchases.
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False; the amount is recorded as a debit to Supplies.
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The terms 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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The contra account Purchases Discount has a normal credit balance.
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True
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The petty cash account Cash Short and Over is a permanent account.
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False; the account is a temporary account.
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Exceeding a vendor's credit limit can cause a disruption in the company's ability to purchase merchandise.
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True
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A journal is proved and ruled whenever a journal page is filled, and always at the end of a month.
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True
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The total of the General amount columns of a cash payments journal are not posted to the general ledger.
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True
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The total of an accounts payable trial balance should equal the total of Accounts Payable.
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True
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Purchased merchandise on account from Walner Electric.
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Journal: Purchases Journal Debit: Purchases Credit: Accounts Payable and Walner Electric
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Paid Cash for rent.
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Journal: Cash Payments Journal Debit: Rent Expense Credit: Cash
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Paid cash to Triangle Suppliers for supplies.
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Journal: Cash Payments Journal Debit: Supplies Credit: Cash
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Purchased merchandise from Zaben Corp. for cash.
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Journal: Cash Payments Journal Debit: Purchases Credit: Cash
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Paid cash on account to Walner Electric, less purchases discount.
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Journal: Cash Payments Journal Debit: Accounts Payable and Walner Electric Credit: Cash and Purchases Discount
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Paid cash on account to Triangle Suppliers.
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Journal: Cash Payments Journal Debit: Accounts Payable and Triangle Suppliers Credit: Cash
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Paid cash to replenish the petty cash fund: supplies, miscellaneous, cash over.
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Journal: Cash Payments Journal Debit: Supplies and Miscellaneous Expense Credit: Cash and Cash Short and Over
