t4-6

Question 1

activity through A/R

Answer 1

a. Beginning Balance
b. +credit sales
c. -returns
d. -allowance
e. -sales discounts
f. -cash collections
g. -write-off bad debts
h. = ending balance

Question 2

why sell on credit?

Answer 2

a. Convenient
b. Encouragement
c. Relationship
d. Credit cards

Question 3

what is a subsidiary ledger?

Answer 3

a. ledger that summarizes a single general ledger account

Question 4

activity through A/P

Answer 4

a. Beginning balance
b. +purchases on credit
c. -returns
d. -allowances
e. -purchase discounts
f. -cash payments
g. = Ending balance

Question 5

why purchase on credit?

Answer 5

a. Convenient
b. Short-term, interest free loan
c. Allows ability to “try before you pay”

Question 6

controls over purchases

Answer 6

a. Separation of duty (purchasing, physical custody, recordkeeping)
b. Authorization of purchases
c. Properly documented
i. Purchase order
ii. Receiving order
iii. Invoice
d. Can take advantage of discounts