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Principles of Financial Accounting > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

What is an accounts payable subsidiary ledger?

A

The subsidiary ledger containing the individual accounts with suppliers (creditors); also called the creditors ledger.

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2
Q

What is an accounts receivable subsidiary ledger?

A

The subsidiary ledger containing the individual accounts with customers; also called the customers ledger.

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3
Q

What are administrative expenses?

A

Expenses incurred in the administration or general operations of the business.

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4
Q

What is the asset turnover ratio?

A

A profitability ratio that measures how effectively a business is using its assets to generate sales, computed as sales divided by average total assets.

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5
Q

What does B2B stand for?

A

Business-to-business; transactions between suppliers and retailers.

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6
Q

What does B2C stand for?

A

Business-to-consumer; transactions between retailers and consumers.

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7
Q

What is a cash refund?

A

An amount paid by the seller to the buyer for merchandise that is defective, is damaged during shipment, or does not meet the buyer’s expectations.

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8
Q

What is a controlling account?

A

The account in the general ledger that summarizes the balances of the accounts in a subsidiary ledger.

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9
Q

What is cost of goods sold?

A

The cost of merchandise sold recognized as an expense.

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10
Q

What are coupons?

A

A sales incentive or promotion that provides the customer a discount when purchasing a product.

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11
Q

What is a credit memorandum?

A

A form used by a seller to inform the buyer of the amount the seller proposes to credit to the account receivable due from the buyer.

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12
Q

What is a credit period?

A

The amount of time the buyer is allowed in which to pay the seller.

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13
Q

What are credit terms?

A

Terms for payment on account by the buyer to the seller.

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14
Q

What is Customer Refunds Payable?

A

A liability account for estimated refunds and allowances that will be paid or granted to customers in the future.

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15
Q

What are debit (bank) cards?

A

A card used for electronic payment by which the money required by the purchase is deducted instantly from the customer’s bank account.

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16
Q

What is a debit memorandum?

A

A form used by a buyer to inform the seller of the amount the buyer proposes to debit to the account payable due the seller.

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17
Q

What is Estimated Coupons Payable?

A

A current liability account for the estimated amount of coupons printed out with sales receipts that will be redeemed by customers.

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18
Q

What is Estimated Returns Inventory?

A

A current asset account for the estimated amount of merchandise that will be returned by customers.

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19
Q

What does FOB destination mean?

A

Freight terms in which the seller pays the transportation costs from the shipping point to the final destination.

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20
Q

What does FOB shipping point mean?

A

Freight terms in which the buyer pays the transportation costs from the shipping point to the final destination.

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21
Q

What is a general ledger?

A

The primary ledger, when used in conjunction with subsidiary ledgers, that contains all of the balance sheet and income statement accounts.

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22
Q

What is the gross method of recording sales discounts?

A

A method of recording a sales invoice at the gross amount rather than the amount net of any discounts offered for early payment.

23
Q

What is gross profit?

A

Sales minus the cost of goods sold.

24
Q

What are instant rebates?

A

Rebates that may be redeemed at the time of purchase.

25
Q

What is inventory?

A

Merchandise on hand (not sold) at the end of an accounting period.

26
Q

What is inventory shrinkage?

A

The amount by which the merchandise for sale, as indicated by the balance of the inventory account, is larger than the total amount of merchandise counted during the physical inventory.

27
Q

What is an inventory subsidiary ledger?

A

A supporting ledger to the inventory account, containing an individual account for each inventory item.

28
Q

What is an invoice?

A

The bill that the seller sends to the buyer for sales made or services rendered on account.

29
Q

What is a multiple-step income statement?

A

A form of income statement that contains several sections, subsections, and subtotals.

30
Q

What is the net method of recording sales discounts?

A

A method of recording a sales invoice at the amount net of any discounts for early payment.

31
Q

What is the operating cycle?

A

The process by which a company spends cash, generates revenues, and receives cash from customers.

32
Q

What is operating income?

A

The difference between gross profit and operating expenses.

33
Q

What are other expenses?

A

Expenses that cannot be traced directly to operations.

34
Q

What is other revenue?

A

Revenue from sources other than the primary operating activity of a business.

35
Q

What is a periodic inventory system?

A

An inventory system in which the inventory records are updated only after a physical count has been taken at periodic intervals, usually at the end of an accounting period.

36
Q

What is a perpetual inventory system?

A

The inventory system in which each purchase and sale of merchandise is recorded in the inventory account and related subsidiary ledger; therefore, the inventory records are updated continuously.

37
Q

What is a physical inventory?

A

A detailed listing of merchandise on hand.

38
Q

What are point-of-sale coupons?

A

A coupon that has no value and the retailer has no obligation until a customer purchases merchandise and presents the coupon.

39
Q

What are purchases discounts?

A

Discounts taken by the buyer for early payment of an invoice.

40
Q

What are purchases returns and allowances?

A

From the buyer’s perspective, returned merchandise or an adjustment for defective merchandise.

41
Q

What are rebates?

A

A sales incentive or promotion that provides the customer a refund after the product is purchased.

42
Q

What is a retail business?

A

A type of business that purchases products from other businesses and sells them to customers.

43
Q

What are sales?

A

How revenue from the sale of merchandise is recorded; the total amount charged customers for merchandise sold, including cash sales and sales on account.

44
Q

What is a sales allowance?

A

A reduction in a customer’s account receivable granted due to damaged or defective merchandise.

45
Q

What is a sales discount?

A

From the seller’s perspective, a discount that a seller may offer the buyer for early payment.

46
Q

What are selling expenses?

A

Expenses that are incurred directly in the selling of merchandise.

47
Q

What is a single-step income statement?

A

A form of income statement in which the total of all expenses is deducted from the total of all revenues.

48
Q

What are special journals?

A

Journals designed to be used for recording a single type of transaction that occurs frequently.

49
Q

What is a subsidiary ledger?

A

Individual accounts with a common characteristic grouped together in a separate or secondary ledger, which is used to support a controlling account in the general ledger.

50
Q

Who is a supplier?

A

A company that sells merchandise to retailers.

51
Q

What are trade discounts?

A

Discounts from the list prices in published catalogs or special discounts offered to certain classes of buyers.

52
Q

Who is a vendor?

A

A company that sells merchandise to retailers.

53
Q

What is a wholesale business?

A

A company that sells merchandise to other businesses rather than to the public.

Principles of Financial Accounting (9 decks)

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