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19 Cards in this Set
- Front
- Back
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transactions:
1. purchase of merchandise inventory for cash or on credit 2. payment for purchases made on credit 3. sale of the merchandise inventory for cash or on credit 4. collection of cash from credit sales |
operating cycle
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length of time a business will be without cash from merchandise inventory transactions
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financing period
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continuous records are kept of the quantity, and usually, the cost of individual items as they are bought and sold. It enables managers to quickly determine product availability, avoid running out of stock, and control the costs of carrying inventory. A physical count of the inventory should be taken periodically to make sure that the actual number of goods on hand matches the accounting records
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perpetual inventory system
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no detailed records of inventory are kept during the accounting period; the merchandiser waits until the end of the period to take a physical count of the inventory. Is simpler and less costly to maintain than the perpetual inventory system. Lack of detailed records may lead to inefficiencies, lost sales, and higher operating costs.
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Periodic inventory system
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actual count of the merchandise on hand
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physical inventory
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encompasses all the policies and procedures management uses to ensure the reliability of financial reporting, compliance with laws and regulations, and the effectiveness and efficiency of operations
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internal control
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identifying areas of which risk of asset loss or inaccuracy of accounting records is especially high
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risk assessment
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relates to the accounting system that management sets up and to the communication of individual responsibilities within that system
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information and communication
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procedures and policies that management establishes to ensure that the objectives of internal control are met
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control activities
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management's regular assessment of the quality of internal control
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monitoring
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When a company purchases goods, it would prepare all of the following business documents except an
a. invoice b. purchase order c. check authorization d. purchase requisition |
a. invoice
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A pretax income always results when
a. cost of goods sold exceeds operating expenses b. revenues exceed the cost of goods sold c. revenues exceed operating expenses d. the gross margin exceeds operating expenses |
d. gross margin exceeds operating expenses
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Which of the following appears as an operating expense on the income statement of a merchandising concern?
a. freight-in b. delivery expense c. revenues exceed operating expenses d. the gross margin exceeds operating expenses |
b. delivery expense
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In a firm's beginning merchandise inventory is $400, its ending merchandise inventory is $700, and its cost of goods sold is $3,400, the net cost of purchases
a. is $3,700 b. is $3,400 c. is $3,100 d. cannot be determined |
a. $3,700
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A sale is made on June 1 for $200, terms 2/10, n/30, on which a sales return of $50 is granted on June 7. The dollar amount received for payment in full on June 9 is
a. $200 b. $150 c. $147 d. $196 |
c. $147
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Which of the following accounts is not used in conjunction with a perpetual inventory system?
a. cost of goods sold b. freight-in c. purchases d. merchandise inventory |
c. purchases
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Which of the following transactions is not part of the operating cycle?
a. sale of inventory b. cash payment for operating expenses c. purchase of inventory d. cash collection from inventory sales |
b. cash payment for operating expenses
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A company has credit card sales for the day of $1,000. If the credit card company charges 5 percent, the company's journal entry to record sales and the receipt of cash when it deposits the credit card invoices at its bank would include a
a. credit to sales for $950 b. credit to credit card discount expense for $50 c. debit to sales for $1,000 d. debit to cash for $950 |
d. debit to cash for $950
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On average, it takes Meadows Corporation 45 days to sell its inventory and 60 days to collect payment from customers. Meadows normally pays for inventory purchases within 30 days. Its financing period is
a. 75 days b. 135 days c. 15 days d. 105 days |
a. 75 days
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