Acctg (Far) Mod 3-4

Question 1

This source document is prepared by the seller for goods sent to the buyer

Answer 1

Sales Invoice

Question 2

This source document is about shipping details

Answer 2

Bill of Lading

Question 3

This source document is a formal notice of accounts due

Answer 3

Statement of account

Question 4

This source document is evidences for the receipt of cash

Answer 4

Official receipt

Question 5

This source document is details of a deposit made

Answer 5

Deposit slip

Question 5

This source document is a written request to the purchaser that goods be purchased

Answer 5

Purchase requisition

Question 6

This source document is a written order to a bank to pay the payee

Answer 6

Check

Question 6

This source document is an authorization made by the buyer to the seller to deliver the merchandise

Answer 6

Purchase Order

Question 6

This source document is a document containing the goods received from the seller

Answer 6

Receiving Report

Question 7

This is the time given for processing payment

Answer 7

Credit Period (ex: n/30 = 30 days to pay, n/10= 10 days to pay, etc.

Question 8

This source document is used by the seller to notify adjustments to the buyers account

Answer 8

Credit/Debit Memorandum

Question 9

This system is primarily used for inexpensive goods, not using computerized scanning system

Answer 9

Periodic System (if the situation is silent, you use periodic system)
-Notable accounts are purchases, freight in/out, no cogs

Question 10

These are markdowns from the list price

Answer 10

Trade discount

Question 10

This is the discount given for prompt payment

Answer 10

Cash Discount (ex: 2/10 = 2% discount if you pay w/in 10 days, 3/15 = 3% discount if you pay w/in 15 days)
its a purchase discount if you’re a buyer
its a sales discount if you’re a seller

Question 11

This system is advisable for firms that sell low-volume, high priced goods

Answer 11

Perpetual System (The long one)
-Notable accounts are merchandise inventory that replace the account for purchases, freight in, and discounts
-No freight in, no Purchase returns and allowances

Question 12

These are the costs selling expenses related stuff like sales salaries and commission

Answer 12

Distribution costs

Question 13

What are the methods of recording deferrals and accruals for expenses?

Answer 13

1. Asset method (used as a default)
2. Expense method

Question 13

These are costs not related to the business

Answer 13

Other Operating Expenses

Question 13

These costs are related to the general administrative of the business like office supplies, taxes, professional fees, etc

Answer 13

Administrative Costs

Question 14

In this basis of adjusting, the effects of transactions and other events are recognized when they occur and not as cash is received or paid
Essentially revenues are recorded when they are earned, and expenses as they are incurred

Answer 14

Accrual Basis (The default option

Question 15

In this basis of adjusting, transactions are not recorded until cash is received or paid

Answer 15

Cash basis

Question 16

What are the principles the adjustment process relies on?

Answer 16

1. Revenue
2. Expenses

Question 17

What are the methods of recording deferrals and accruals for Revenues?

Answer 17

1. Liability method (used by default)
2. Income method

Question 18

How would you record and adjust the following transaction with the asset/expense method
(assume that it ends in may 31)

May 1, acquired 1-year insurance coverage and paid 12k for it

Answer 18

Asset method
Prepaid Insurance - 12k Dr.
Cash - 12k Cr.

Adjustment at May 31
Insurance Expense - 1k Dr.
Prepaid Insurance - 1k Cr
(Remaining prepaid balance is 11k)

Expense method
Insurance Expense - 12k Dr.
Cash - 12k Cr.

Adjustment at May 31
Prepaid Insurance - 11k
Insurance Expense - 11k
(Remaining prepaid balance is 11k still)