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27 Cards in this Set
- Front
- Back
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Unlike a proprietorship, a corporation exists independent of its owners.
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A corporation can incur liabilities but cannot own property.
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F
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As in a proprietorship, in formation in a corporation's accounting system is kept separate from the personal records of the owners, and this accounting concept is called a Business Entity.
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T
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The selling price of merchandise must be greater than the cost of merchandise for a business to make a profit.
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The cost account Purchases is used only to record the value of merchandise purchased.
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T
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When purchases are recorded at their cost, including any related shipping costs and taxes, the Historical Cost accounting concept is being applied.
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Recording entries in a journal with special amount columns saves time.
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T
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All purchase transactions, including purchases made on account and purchases made for cash, are recorded in the purchases journal.
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F
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The source document for recording a purchase on account transaction is a memorandum describing the merchandise purchased.
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F
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By listing the quantity, the description, the price of each item, and the total amount purchased, the Objective Evidence concept is applied.
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T
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A purchase invoice usually lists only the total cost of the merchandise.
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A purchase on account transaction increases the amount owed to a vendor.
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A cash payments journal includes a special amount column for the cash account and the accounts payable account.
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The source document for most cash payments is the check issued.
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T
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When supplies are purchased for use in the business, the amount is recorded in the purchases account.
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F
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A special journal entry is made to show the amount of a trade discount.
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The terms of sale 2/15, n/30 mean that 2% of the invoice amount may be deducted if paid within 15 days of the invoice date or the total invoice amount must be paid within 30 days.
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Purchase discounts are recorded in the general journal.
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The contra account Purchases Discount has a normal credit balance.
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The custodian prepares a petty cash report when the petty cash fund is to be replenished.
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The petty cash account Cash Short and Over is a permanent account.
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F
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A journal is proved and ruled only at the end of a fiscal period.
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F
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To begin a new journal page, the totals from the previous journal page are carried forward to the next journal page.
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Buying supplies on account is recorded in the general journal.
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When store supplies are purchased on account, the Store Supplies account balance increases and the Accounts Payable account balance increases.
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T
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The source document for a purchases return is a check.
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F
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The normal account balance of Purchases Returns and Allowances is a credit.
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T
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