Accounting Test 2

Front 1

2/10 n/30

Back 1

the buyer will get a 2% discount if they pay within 10 days, and full payment must be made within 30 days

Front 2

Acid test ratio

Back 2

Cash and equivalents +short term investments+ current receivables

Front 3

cash discount

Back 3

a discount a seller gives a buyer to encourage sooner payment (sales discount)

Front 4

computing income for a merchandiser

Back 4

net sales - cogs = gross profits - expenses = net income

Front 5

Cost of Goods Sold (COGS)

Back 5

the expense of buying and preparing merchandise

Front 6

credit memorandum

Back 6

informs a buyer of the seller's credit to the buyer's account receivable (on the sellers books)

Front 7

credit period

Back 7

the amount of time allowed before full payment is due

Front 8

debit memorandum

Back 8

when a buyer returns or takes an allowance on merchandise

Front 9

Delivery expense

Back 9

aka transportation out or freight out

Front 10

FIFO

Back 10

First in First out - assumes cost flow in the order incurred

Front 11

FOB destination

Back 11

ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business

Front 12

FOB shipping

Back 12

also called FOB factory means the buyer accepts ownership when the goods depart the seller's place of business.

Front 13

FOB

Back 13

free on board point determines who pays transportation costs

Front 14

Goods on consignment

Back 14

goods shipped by the owner to another party

Front 15

gross profit

Back 15

net sales less cost of goods sold

Front 16

Income statement effects

Back 16

Inventory Error COGS net income

Front 17

Income statement

Back 17

Sales revenues

Front 18

JE -increase petty cash amount

Back 18

debit petty cash

Front 19

JE- adjust inventory costs to market

Back 19

Debit Cogs

Front 20

JE- adjusting entry to record shrinkage

Back 20

Debit COGS

Front 21

(e.g. $1200 on credit with terms 2/10 n/30 )

Back 21

debit merchandise inventory 1200

Front 22

(e.g. $1200 on credit with terms 2/10 n/30 )

Back 22

debit accounts payable 1200

Front 23

JE- buyer paying freight costs

Back 23

Debit merchandise inventory

Front 24

JE- buyer returning merchandise on credit

Back 24

debit accounts payable

Front 25

JE- cash over and short

Back 25

debit cash

Front 26

JE- check printing

Back 26

debit misc. expense

Front 27

JE- collection of a note

Back 27

debit cash

Front 28

JE- cost part of selling merchandise

Back 28

debit COGS

Front 29

JE- customer returns merchandise

Back 29

Debit Sales returns and allowances

Front 30

JE- establish a petty cash fund

Back 30

debit petty cash

Front 31

JE- Interest earned

Back 31

debit cash

Front 32

JE- NSF check

Back 32

debit accts rec.

Front 33

JE- Purchased Merchandise with Cash

Back 33

Debit Merchandise inventory

Front 34

JE- record sales allowance

Back 34

debit sales returns and allowances

Front 35

JE- reimburse petty cash

Back 35

debit expense

Front 36

JE- reimburse petty cash

Back 36

debit expenses

Front 37

JE- returned goods added to inventory

Back 37

Debit merchandise inventory

Front 38

JE- sale on account where buyer did NOT take advantage of discount

Back 38

debit cash

Front 39

JE- sale on account where buyer took advantage of discount

Back 39

Debit Cash

Front 40

JE- sales discount on credit

Back 40

Debit Accounts receivable

Front 41

JE- selling merchandise on credit

Back 41

debit accounts receivable

Front 42

LIFO

Back 42

Last in First out - assumes costs flow in the reverse order incurred

Front 43

List Price

Back 43

catalog price

Front 44

merchandise inventory

Back 44

products that a company owns and intends to sell

Front 45

Merchandisers Cost flow for a single time period

Back 45

beginning inventory + net cost of purchases = merchandise available for sale = ending inventory + cogs

Front 46

n/10 EOM

Back 46

(net 10 days) payment is due within 10 days

Front 47

operating cycle for a merchandiser

Back 47

Purchases, Merchandise Inventory, Credit sales, Accounts receivable, Cash collection

Front 48

periodic inventory

Back 48

updates the accounting records for merchandising transactions only at the end of a period

Front 49

perpetual inventory system

Back 49

continually updates accounting records for merchandising transactions

Front 50

Principles of internal control

Back 50

establish responsibilites, maintain adequate records, insure assets and bond key employees, seperate recordkeeping from custody of assetts, divide responsibility for related transactions, apply technological controls, perform regular and independant reviews

Front 51

purchase discount

Back 51

a buyer's view as a cash discount

Front 52

purposes of bank reconciliation

Back 52

outstanding checks, deposits in transit, deductions for uncollectible items and for services, additions for collections and interest, errors

Front 53

Sales returns

Back 53

merchandise a customer returns to the seller after a sale

Front 54

selling price

Back 54

list price - trade discount

Front 55

Weighted Average

Back 55

assumes cost flow at an average of the costs available