Bookkeeping 31 Flashcards
1
Q
- Why would the owners want to know the retail value of inventory?
A
- For tax reasons
- For insurance purposes
- To know the value of the business when it is sold.
2
Q
- When a sale is made, the entry is:
A
Cash………100
Sales………..100
3
Q
- When merchandise is sold and THEN RETURNED, what account is needed to record the entry?
A
SALES RETURNS AND ALLOWANCES
4
Q
- What is the entry when an item is returned to the store?
A
Sls Ret and Allow…100
Cash………………100
or
Sls Ret and Allow…100
Accounts Rec……100
5
Q
- What is the purpose for having a SALES RETURNS AND ALLOWANCES account?
A
It shows management the value of goods the customers were dissatisfied with.
6
Q
- What kind of account is the SALES RETURNS AND ALLOWANCES account?
A
CONTRA ACCOUNT that works against the SALES ACCOUNT.
7
Q
- What is a PURCHASE DISCOUNT?
A
a reduction in price that VENDORS offer merchandising firms for quantity orders or for prompt payment.
8
Q
- To show discounts gained through early payment or quantity orders from VENDORS, what account is needed?
A
PURCHASE DISCOUNTS account.
9
Q
- What is the entry when a DISCOUNT is TAKEN on a transaction that was originally done on credit?
A
Acc Payable…2000
Cash…………….1800
PURCH DISC……200
10
Q
- What is the reason for the PURCHASE DISCOUNTS account?
A
it enables management to see the monetary value of quantity purchases and prompt payment, which is weighted against the interest that could be earned on the funds expended.
