Accounting: Test 3

Front 1

When is the Merchandise Inventory account updated in a perpetual system?

Back 1

Throughout the period (with each transaction)

Front 2

Is it necessary to take a physical count at the end of the period in a perpetual system and for what purpose?

Back 2

Yes, to verify the ending balance

Front 3

What level of control does the perpetual inventory system provide?

Back 3

High level

Front 4

Types of goods historically associated with the perpetual system?

Back 4

High value, Low volume goods

Front 5

When/how is Cost of Goods Sold determined in a perpetual system?

Back 5

Cost of Goods Sold is determined and recorded with each sale.

Front 6

How many journal entries are needed for each sales transaction in a perpetual system?

Back 6

2 Entries:
One recordes revenue earned
Another records expense account Cost of Goods Sold and removes it from inventory

Front 7

How do you record purchases of inventory from a supplier in a perpetual system?

Back 7

Debit merchandise inventory

Front 8

How is freight paid on inventory purchased from a supplier [FOB shipping point] treated in a perpetual system?

Back 8

Considered part of cost inventory and debited to Merchandise Inventory account

Front 9

How are discounts taken on goods purchased from a supplier treated in a perpetual system?

Back 9

Credited to Merchandise Inventory account, reducing the cost of the inventory

Front 10

How are returns and allowances on goods that we purchased from a supplier treated in the perpetual system?

Back 10

Credited to the Merchandise Inventory account and reducing the cost of the inventory

Front 11

When is the merchandis inventory account updated in the periodic system?

Back 11

Only at the end of the period

Front 12

Is it necessary to take a physical count at the end of the period and for what purpose in the periodic system?

Back 12

Yes, physical count necessary to OBTAIN ending inventory

Front 13

What level of control does the periodic inventory system provide?

Back 13

Low level

Front 14

Types of goods historically associated with the periodic system?

Back 14

LOW-value, high volume of goods

Front 15

When/how is cost of goods sold determined in a periodic system?

Back 15

Determined through a calculation done at the end of the period.

Front 16

How many journal entries are needed for each sales transaction in the periodic system?

Back 16

1 Entry
An entry records Revenue earned

Front 17

How do you record purchases of inventory from a supplier in the periodic system?

Back 17

Debit the purchases account

Front 18

How is freight paid on inventory purchased from a supplier [FOB shipping point] treated in periodic system?

Back 18

Discounts from supplier are accumulated in the purchase discounts account

Front 19

How are returns and allowances on goods that we purchased from a supplier treated in a periodic system?

Back 19

Accumulate in purchase returns and allowances

Front 20

What are the six principles of internal control

Back 20

Establishment of responsibility
Documentation procedures
segregation of duties
Independent internal verification
Physial Mechanical and Electronic controls
Other Controls

Front 21

One person should be assigned the responsibility for a specific task

Back 21

Establishment of Responsibility

Front 22

Business documents should provide evidence that transactions and events have occured. Documentation includes prenumbered documents and accounting for all docs

Back 22

Documentation Procedures

Front 23

There should be a division of work or separation for runctions and this is accomplished by assigning related activities to different individuals, and not allowing individuals to have physical custody of an asset.

Back 23

Segregation of Duties

Front 24

This principle involves the review, comparison, and reconciliation of data prepared by other employees

Back 24

Independent Internal Verification

Front 25

Includes the use of locks, alarms, passwords, tv monitors and other devisces to protect the assets and the accounting records of the company

Back 25

Physical, Mechanical, and Electronic Controls

Front 26

Bonding of employees, required vacations and rotation of duties are examples of:

Back 26

Other Controls