Ch.8 Accounting for stock

Question 1

Define trading firm

Answer 1

A business who purchases stock and resales it for a profit.

Question 2

Define stock

Answer 2

Goods purchased by a trading firm in for the purpose of resale for a profit.

Question 3

Why is stock important?

Answer 3

Because its the second most important asset a business has. (Bank if first).

Question 4

What is a business main source of evidence?

Answer 4

Stock

Question 5

Define stock cards

Answer 5

Is a subsidiary accounting record that records each transaction of the movement of stock in and out of the business.

Question 6

Define FIFO

Answer 6

Is a cost flow assumption that the first goods purchased are the first goods sold. FIFO may be used when the business cant physically identify different stock which have different cost prices.

Question 7

Why are stock cards important?

Answer 7

Because they are a source that is recorded in the journals that determine the cost price of goods when being sold.