accounting chapter 9 vocab & true and false Flashcards
accounting for purchases and cash payments
merchandise
goods a business purchases to sell
merchandising business
A business that purchases and resells goods
retail merchandising business
A merchandising business that sells to those who use or consume the goods.
wholesale merchandising business
buys and resells merchandise primarily to other merchandising businesses.
corporation
An organization with the legal rights of a person which many persons or other corporations may own.
capital
The assets or other financial resources available to a business.
share of stock
A unit of ownership in a corporation.
stock holder
The owner of one or more shares of stock.
capital stock
The total shares of ownership in a corporation
articles of incorporation
Defines how corporation is set up
charter
the legal right for a business to conduct as a corporation.
vendor
A business from which merchandise, supplies, or other assets are purchased.
subsidiary ledger
a single general ledger account. (subledger)
accounts payable ledger
contains vendor accounts.
controlling account
summarizes all accounts in a subsidiary ledger(gen ledg)
inventory
A list of assets, usually containing the value of individual items.
merchandise inventory
has on hand for sale to customers.
perpetual inventory
An inventory determined by records
periodic inventory
A merchandise inventory evaluated at the end of a fiscal period.
physical inventory
A periodic inventory conducted by counting, weighing, or measuring items of merchandise on hand.
cost of merchandise
The amount a business pays for goods it purchases to sell.
requisition
A form requesting the purchase of merchandise.
purchase order
A form requesting that a vendor sell merchandise to a business.
special journal
A journal used to record only one kind of transaction.
purchase on account
A transaction in which the items purchased are to be paid for later.
purchases journal
used to record only purchases of merchandise on account.
special amount column
A journal amount column headed with an account title.
purchase invoice
source document for recording a purchase on account transaction.
terms of sale
How to pay for merchandise (agreement)
due date
an invoice must be paid(date)
cash payments journal
to record only cash payment transactions.
list price
The retail price listed in a catalog or on an Internet site.
trade discount
A reduction in the list price granted to a merchandising business.
net price
the amount after the trade discount
cash discount
A deduction that a vendor allows on an invoice amount to encourage prompt payment.
general amount column
amount column that (no account title)
discount period
cash discount for customers (period of time)
purchases discount
cash discount for companys that buy merchindise
contra account
reduces a related account on a financial statement
credit limit
The maximum outstanding balance allowed to a customer by a vendor
schedule of accounts payable
vendor accounts (accounts payable trial balance)
controlling account
summarizes all accounts in a subsidiary ledger (general ledger)
A corporation can incur liabilities but cannot own property.
false
The articles of incorporation typically include the name and address of the business, its purpose for operating, any limitations on its activities and rules for dissolving the corporation.
true
Unlike a proprietorship, a corporation exists independent of its owners.
true
The total of accounts in the accounts payable ledger equals the balance of the controlling account, Accounts Payable.
true
The accounts payable ledger form contains the same columns as the general ledger except that it lacks a Credit Balance column.
false
The perpetual inventory method is easier to maintain than the periodic method. The perpetual method does not require records of the quantity and cost of individual goods.
false
When a periodic inventory system is used, the cost of merchandise is recorded to Purchases.
true
The income statement of a merchandising business places Purchases in a section titled Cost of Goods Sold, separate from other expenses.
true
A purchase invoice lists the quantity, the description, and the price of each item and shows the total amount of the purchase.
true
A transaction to record merchandise purchased with a trade discount would include a credit to Merchandise Discount.
false
When journalizing a cash payment for advertising, the vendor’s name is written in the Account Title column of the cash payments journal.
false
When supplies are purchased for use in the business, the amount is recorded as a debit to Purchases.
false
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.
true
The contra account Purchases Discount has a normal credit balance.
true
The petty cash account Cash Short and Over is a permanent account.
false
Exceeding a vendor’s credit limit can cause a disruption in the company’s ability to purchase merchandise.
true
A journal is proved and ruled whenever a journal page is filled, and always at the end of a month.
true
The totals of the General amount columns of a cash payments journal are posted to the general ledger.
false
The total of an accounts payable trial balance should equal the total of Accounts Payable.
true
