Test #2 Flashcards Preview

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Flashcards in Test #2 Deck (39):
1

How do you journalize a sale of merchandise for cash? (What do you debit, credit, and record?)

Dr. Cash
Cr. Sales
to record sale of merchandise

2

How do you journalize a sale of merchandise "on account"? (What do you debit, credit, and record?)

Dr. Accounts Receivable
Cr. Sales
to record sale of merchandise "on account"

3

How do you journalize a sale of merchandise by MasterCard/Visa? (What do you debit, credit, and record?)

Dr. Cash
Cr. Sales
to record sale of merchandise; customer paid with MasterCard

4

What is special about the way MasterCards, Visa, and American Express are journalized?

They are treated just like cash

5

How do you journalize the cost of merchandise sold? (What do you debit, credit, and record?)

Dr. Cost of Goods Sold
Cr. Inventory
to record cost of merchandise sold

6

How do you journalize inventory shrinkage? (What do you debit, credit, and record?)

Dr. Cost of Goods Sold
Cr. Inventory
to record inventory shrinkage

7

How do you journalize the collection of sales tax? (What do you debit, credit, and record?)

Dr. Cash
Cr. Sales
Cr. Sales Tax Payable
to record sale of merchandise and associated Sales Tax

8

How do you come up with the sales tax amount (the price in dollars)?

Sales x Sales Tax Percent

9

Who is responsible to collect sales taxes on behalf of the government?

The Merchant

10

Who is the merchant?

the company selling the goods

11

What does the merchant act as?

An agent for the taxing authority

12

What must the merchant do with the collected sales taxes?

Remit the taxes to the government

13

What account do sale taxes fall under and what is it's title?

It is a liability and is titled "Sales Tax Payable"

14

What is the formula to calculate gross profit?

Sales - Cost of Goods Sold = Gross Profit

15

What is the formula to calculate net income?

Gross Profit - Operating Expenses = Net Income

16

What are the accounts listed in a merchant's Chart of Accounts? (associated with the sale of goods)

Inventory
Sales
Cost of Goods Sold
Freight Out

17

What is account does Inventory fall under? What's it's normal balance?

Asset or Current Asset with a normal Debit balance

18

What is a current asset?

An asset expected to be used within the next 12 months.

19

What is account does Sales fall under? What's it's normal balance?

Revenue with a normal Credit balance

20

What is account does Cost of Goods Sold fall under? What's it's normal balance?

Expenses with a normal Debit balance

21

What is account does Freight Out fall under? What's it's normal balance?

Expenses with a normal Debit balance

22

What does FOB stand for?

Free on Board

23

Who does the merchandise transfer from in FOB Shipping Point? Who does it transfer to?

from the seller to the buyer

24

Who pays for the freight during FOB Shipping Point?

The Buyer

25

Who does the merchandise transfer from in FOB Destination? Who does it transfer to?

from the seller to the buyer

26

Who pays for the freight during FOB Destination?

The Seller

27

Who makes a gross profit?

EVERYONE

28

When the buyer pays the freight, what should be debited?

Inventory

29

When the seller pays the freight, what should be debited?

Delivery Expenses

30

When is there no timing difference in a journal entry?

When cash is involved

31

What does accounts receivable track?

Who owes money

32

What is gross profit?

Profit before deducting operating expenses

33

What is merchandise inventory?

Merchandise not sold

34

Does gross profit mean net income?

No

35

What should be a part of a journal entry that records a purchase "on account"?

Accounts Payable

36

What should be a part of a journal entry that records a sale "on account"?

Accounts Receivable

37

What are journal entries?

A way to record economic events onto the book & records of a company. They must be in good form.

38

What is posting?

the process of transferring the debits and credits from the journal entries to the T-Account.

39

What is good form?

All debits before credits