FAR THEORY - OTHERS Flashcards
Which one of the following is not a difference between a retail business and a service business?
a. accounting equation
b. the inclusion of gross profit in the income statement
c. merchandise inventory included in the balance sheet
d. in what is sold
a. accounting equation
Net income plus operating expenses is equal to
a. gross profit
b. net sales
c. cost of merchandise sold
d. cost of goods available for sale
a. gross profit
What is the term applied to excess net revenue from sales over the cost of merchandise sold?
a. income from operations
b. gross sales
c. net income
d. gross profit
d. gross profit
The term “inventory” indicates
a. merchandise held for sale in the normal course of business
b. supplies
c. materials in the process of production or held for the production
d. both merchandise held for sale in the normal course of business and materials in the process of production or held for the production
d. both merchandise held for sale in the normal course of business and materials in the process of production or held for the production
Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as
a. other expenses
b. selling expenses
c. general expenses
d. administrative expenses
b. selling expenses
Office salaries, depreciation of office equipment, and office supplies are examples of what expenses?
a. other expense
b. selling expense
c. administrative expense
d. miscellaneous expense
c. administrative expense
The form of the income statement that derives its name from the fact that the total of all expenses is
deducted from the total of all revenues is called a
a. multiple-step statement
b. revenue statement
c. single-step statement
d. report-form statement
c. single-step statement
When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the
a. account form
b. report form
c. comparative form
d. horizontal form
b. report form
The statement of retained earnings shows
a. only net income/net loss, dividends, and beginning and ending retained earnings
b. only total assets, beginning and ending
retained earnings
c. only net income, beginning and ending
retained earnings
d. only net income, beginning Capital Stock,
and dividends
a. only net income/net loss, dividends, and beginning and ending retained earnings
Merchandise inventory is classified on the balance sheet as a
a. Long-Term Liability
b. Current Asset
c. Current Liability
d. Long-Term Asset
b. Current Asset
Which account is not classified as a selling expense?
a. Advertising Expense
b. Transportation-Out
c. Sales Discounts
d. Sales Salaries
c. Sales Discounts
The primary difference between a periodic and perpetual inventory system is that a
a. the periodic system provides an easy means to determine inventory shrinkage
b. the periodic system keeps a record showing the inventory on hand at all times
c. the periodic system records the cost of the sale on the date the sale is made
d. the periodic system determines the inventory on hand only at the end of the accounting period
d. the periodic system determines the inventory on hand only at the end of the accounting period
The inventory system employing accounting records that continuously disclose the amount of inventory is called
a. perpetual
b. physical
c. periodic
d. retail
a. perpetual
When the perpetual inventory system is used, the inventory sold is shown on the income statement as
a. purchases
b. net purchases
c. purchases returns and allowances
d. cost of merchandise sold
d. cost of merchandise sold
When comparing a retail business to a service business, the financial statement that changes the most is the
a. Statement of Cash Flow
b. Statement of Retained Earnings
c. Balance Sheet
d. Income Statement
d. Income Statement
When comparing a retail business to a service business, the financial statement that changes the least is the
a. Income Statement
b. Statement of Cash Flow
c. Statement of Retained Earnings
d. Balance Sheet
d. Balance Sheet
Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a
a. debit to Sales
b. credit to Merchandise Inventory
c. credit to Accounts Receivable
d. debit to Merchandise Inventory
b. credit to Merchandise Inventory
Which of the following accounts has a normal debit balance?
a. Interest Revenue
b. Sales Returns and Allowances
c. Accounts Payable
d. Sales
b. Sales Returns and Allowances
Merchandise is ordered on November 12; the seller ships the merchandise, and the invoice is prepared,
dated, and mailed by the seller on November 15; the buyer receives the merchandise on November 17;
the entry is made in the buyer’s accounts on November 18. The credit period begins on what date?
a. November 17
b. November 18
c. November 15
d. November 12
c. November 15 - INVOICE DATE
If merchandise sold on the account is returned to the seller, the seller may inform the customer of the
details by issuing a
a. purchase invoice
b. sales invoice
c. credit memorandum
d. debit memorandum
c. credit memorandum - reduces the outstanding balance of the buyer and issued when there is:
-return of goods
-overbilling
-price adjustments
-shipping errors
The arrangements between buyer and seller as to when payments for merchandise are to be made are
called
a. cash on demand
b. gross cash
c. credit terms
d. net cash
c. credit terms
In credit terms of 1/10, n/30, the “1” represents the
a. the full amount of the invoice
b. number of days when the entire amount is due
c. percent of the cash discount
d. number of days in the discount period
c. percent of the cash discount
Explanation:
-1% discount if the invoice is paid within 10 days of the invoice date.
-full invoice amount is due within 30 days of the invoice date. No discount is offered after the 10-day period, and the full amount must be paid by day 30.
