U2, AOS 1 - Lesson 1 - Intro to Inventory

Question 1

Impact of cash purchase of inventory on the accounting equation.

Answer 1

Bank decrease
Inventory increase

GST Payable decrease

Question 2

A sales return is…

Answer 2

When a customer makes a return of inventory back to the business.

Question 3

A purchase return is…

Answer 3

A purchase return is when a business makes a return of inventory back to its supplier.

Question 4

The formula for mark-up is…

Answer 4

Cost Price x (1 + Mark Up)

Question 5

A trading business is…

Answer 5

A trading business, also known as a merchandising business, is a type of enterprise that buys products from suppliers or manufacturers and sells them to customers at a profit.

Unlike manufacturing businesses, which produce goods, trading businesses focus on the purchase and sale of goods without significant modification.

Question 6

The three types of inventory are…

Answer 6

1. Raw materials
2. Work in progress
3. Finished goods

Question 7

Inventory is classified as a current asset on the balance sheet as it is…

Answer 7

…reasonably expected to be sold within the next 12 months.

Question 8

Purchase of inventory by the business on credit results in the creation of an…

Answer 8

Accounts payable

Question 9

What impact does a Sales Return have on GST Payable?

Answer 9

Decrease

Question 10

What impact does a Purchase Return have on GST Payable?

Answer 10

Increase