Accounting Chapter 10.2
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Questions and Answers

What is the primary purpose of issuing a credit invoice?

  • To invoice a customer for shipping costs
  • To record a sales return
  • To correct or cancel a previous charge to a customer's account (correct)
  • To record a new sale
  • What is the accounting entry that Masthead would make if a customer returns defective goods?

  • Debit Account Receivable, Credit Sales Returns
  • Debit Sales, Credit Account Receivable
  • Debit Account Receivable, Credit Sales
  • Debit Sales Returns, Credit Account Receivable (correct)
  • What type of invoice would Masthead issue if a customer wanted to return defective goods?

  • Sales invoice
  • Credit invoice (correct)
  • Purchase invoice
  • Debit memo
  • Why would a vendor issue a credit invoice to a customer?

    <p>To correct an error on a previous invoice</p> Signup and view all the answers

    What is the result of a customer returning goods to a vendor?

    <p>A decrease in Sales</p> Signup and view all the answers

    What is the purpose of a credit invoice in the context of a sales return?

    <p>To cancel a previous sale</p> Signup and view all the answers

    What would be the effect on the Vendor's financial statements if a customer returns goods?

    <p>A decrease in Sales and a decrease in Account Receivable</p> Signup and view all the answers

    What is the journal entry that Masthead would make if a customer returns defective goods?

    <p>Debit Sales Returns, Credit Account Receivable</p> Signup and view all the answers

    What type of invoice would be issued by Masthead if a customer wants to return goods that are less than satisfactory?

    <p>Credit invoice</p> Signup and view all the answers

    What is the purpose of a credit invoice in the context of a purchase return?

    <p>To cancel a previous purchase</p> Signup and view all the answers

    Study Notes

    Accounting Procedures for a Merchandising Business

    • Freight-in Account records the charges for freight-in and delivery expense usually found on invoices from transportation companies
    • Duty refers to special charges imposed by the government on certain imported goods, handled the same way as freight-in, debited to a Duty account

    Recording Purchases and Sales

    • Record purchases and sales of inventory, including freight-in, using a three-step process:
    • Beginning Inventory is extended to the debit column of the income statement
    • Ending Inventory (obtained by physical count) is entered in both the credit column of the income statement and debit column of the balance sheet
    • Amounts for Freight-in and Purchases are transferred to the debit column of the income statement

    Worksheet for a Merchandising Business

    • The worksheet has three new merchandising accounts: Freight-in, Purchases, and Ending Inventory
    • The worksheet helps prepare the income statement and balance sheet

    Merchandise Returns and Allowances

    • Some businesses require detailed information about returns and allowances to track what proportion of sales is returned by customers
    • Returns and Allowances accounts are used to accumulate this information
    • Merchandise Returns and Allowances are treated similarly to Purchase Returns and Allowances
    • Revised Cost of Goods Formula is used to calculate the cost of goods sold

    Credit Invoices

    • A credit invoice is a "minus" invoice issued by the vendor to reverse a charge previously made
    • Credit invoices are used to adjust, correct, or cancel a charge to a customer's account for defective goods, unsatisfactory goods, or errors on sales invoices

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    Description

    This quiz covers accounting procedures for a merchandising business, including freight-in and delivery expenses, and duties on imported goods.

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