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Accounting IA Ch.6-8
| Question | Answer |
|---|---|
| What is a trade discount? | Discount for buying in large quantity. |
| What account is affected for purchase discounts in a perpetual system? How is is affected? | Merchandise Inventory is credited. |
| What is a debit memo (debit memorandum)? | Informs the seller of the amount the buyer debited their A/P account to the seller for purchase returns. "Hey, we owe you less money!" |
| What is a credit memo (credit memorandum)? | An authorization for the seller to decrease their A/R account for the buyer. "Hey, Joe Blow owes us less money!" |
| What does 2/10, n30 mean? How is it read? | Credit terms. 2% discount if paid in full in 10 days, must be paid in full in 30 days. Read as "Two ten net thirty". |
| What is a report form? | A balance sheet in a three part downward form. |
| What is an account form? | A balance sheet with assets on the left and liabilities and owner's equity on the right. |
| What are administrative expenses (general expenses)? Give a few examples. | Expenses incurred in management of the business. EG office salaries, office supplies, depreciation of office equipment |
| What are selling expenses? Give a few examples. | Expenses incurred in the direct selling of merchandise. EG advertising expenses, store salaries, delivery fees, depreciation of store equipment and buildings, rent expenses. |
| How is operating income (income from operations) calculated? | Operating income=Net Income Therefore, gross profit minus operating expenses equals operating income or net income/loss. |
| Why are perpetual systems so widely used? | Many businesses use computerized systems. |
| How are the cost of merchandise sold and inventory determined in a periodic system? | By physically counting the inventory at the end of the period. |
| How are the cost of merchandise sold and inventory determined in a perpetual system? | Each purchase and sale is recorded in the Merchandise Inventory and Cost of Merchandise Sold accounts. |
| How do you calculate Net Sales? | Sales-Sales Returns and Allowances-Sales Discounts = Net Sales |
| What kind of accounts are Sales R&A and Sales Discounts? How are the accounted for on the income statement? | They are contra asset accounts. They are subtracted from sales to get net sales. |
| How do you calculate net income? | Sales-Cost of Merchandise Sold = Gross Profit - Operating Expenses = Net Income/Loss |
| How is gross profit calculated? | Sales-Cost of Merchandise Sold = Gross Profit |
Created by:
jilly15
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