Accounting Chapter 9 Test Flashcards

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Questions and Answers

What is the total shares of ownership in a company called?

Capital Stock (correct)

Cash Discount

Stockholder

Corporation

What is the definition of a cash discount?

A deduction that a vendor allows on the invoice amount to encourage prompt payment

What does cash over refer to?

A petty cash on hand amount that is more than a recorded amount

What is a cash payments journal?

A special journal used to record only cash payment transactions Signup and view all the answers

Define cash short.

A petty cash on hand amount that is less than a recorded amount Signup and view all the answers

What is a contra account?

An account that reduces a related account on a financial statement Signup and view all the answers

What characterizes a corporation?

An organization with the legal rights of a person and which many persons may own Signup and view all the answers

What does cost of merchandise refer to?

The price a business pays for its goods it purchases to sell Signup and view all the answers

What is a debit memorandum?

A form prepared by the customer showing the price deduction taken by the customer for returns and allowances Signup and view all the answers

What does a general amount column in a journal indicate?

A journal amount column that is not headed with an account title Signup and view all the answers

What is the list price?

The retail price listed in a catalog or on an Internet site Signup and view all the answers

Define markup.

The amount added to the cost of merchandise to establish the selling price Signup and view all the answers

What is merchandise?

Goods that a business purchases to sell Signup and view all the answers

What characterizes a merchandising business?

A business that purchases and sells goods Signup and view all the answers

What is a purchase invoice?

An invoice used as a source document for recording a purchase on account transaction Signup and view all the answers

What is meant by 'purchase on account'?

A transaction in which the merchandise purchased is to be paid for later Signup and view all the answers

What are purchases allowances?

Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer's accounts payable Signup and view all the answers

Define purchases discount.

A cash discount on purchases taken by a customer Signup and view all the answers

What is a purchases journal?

A special journal used to record only purchases of merchandise on account Signup and view all the answers

What is a purchases return?

Credit allowed for the purchase price of merchandise that is not returned, resulting in a decrease in the customer's accounts payable Signup and view all the answers

Define a retail merchandising business.

A merchandising business that sells to those who use or consume the goods Signup and view all the answers

What is a share of stock?

Each unit of ownership in a corporation Signup and view all the answers

What is a special amount column?

A journal amount column headed with an account title Signup and view all the answers

Define a special journal.

A journal used to record only one kind of transaction Signup and view all the answers

Who is a stockholder?

An owner of one or more shares of a corporation Signup and view all the answers

What are terms of sale?

An agreement between a buyer and a seller about payment for merchandise Signup and view all the answers

What is a trade discount?

A reduction in the list price granted to customers Signup and view all the answers

Define a vendor.

A business from which merchandise is purchased or supplies or other assets are bought Signup and view all the answers

What is a wholesale merchandising business?

A business that buys and resells merchandise to retail merchandising businesses Signup and view all the answers

Study Notes

Accounting Key Terms

Capital Stock: Represents total shares of ownership in a corporation, indicating ownership interest among shareholders.
Cash Discount: A financial incentive offered by vendors, allowing a deduction on invoices to prompt quicker payments from customers.
Cash Over: Refers to a situation where the actual cash in a petty cash fund exceeds the recorded amount, indicating a positive balance.
Cash Payments Journal: A specialized journal exclusively for recording transactions involving cash payments, aiding in precise cash flow tracking.
Cash Short: Occurs when the petty cash amount on hand is less than the recorded amount, signifying a negative discrepancy that must be resolved.
Contra Account: A type of account that reduces the value of a related account on financial statements, often seen in asset and liability accounts.
Corporation: A legal entity recognized as an individual, owned by one or more shareholders, providing limited liability to its owners.
Cost of Merchandise: The total expenditure incurred by a business for goods purchased for resale, crucial for determining profit margins.
Debit Memorandum: A document generated by the customer to indicate price reductions due to returns and allowances, serving as a formal record of accounting adjustments.
General Amount Column: A journal column used for recording transactions without specific account titles, typically applicable for miscellaneous entries.
List Price: The price set for retail goods as displayed in catalogs or online, forming the basis for pricing strategies.
Markup: The additional amount added to the cost of merchandise to calculate its selling price, critical for profitability.
Merchandise: Goods acquired by a business for the purpose of resale, forming the core of many retail operations.
Merchandising Business: A type of business model focused on purchasing goods and selling them to consumers, emphasizing inventory management.
Purchase Invoice: A vital source document used to record transactions involving purchases made on account, essential for accounting records.
Purchase on Account: A type of transaction allowing a business to acquire merchandise with an agreement to pay at a later date, impacting cash flow.
Purchases Allowance: A credit granted to a buyer for goods that are not returned, thereby reducing their accounts payable without the need for returns.
Purchases Discount: A price reduction offered on purchases, serving as an incentive for customers to pay promptly.
Purchases Journal: A specialized recording tool dedicated to documenting purchases made on account, enhancing transaction tracking.
Purchases Return: A formal accounting credit provided for merchandise returned, resulting in a decrease in the buyer's accounts payable.
Retail Merchandising Business: Businesses focused on selling products directly to consumers for personal use, distinguishing them from wholesale entities.
Share of Stock: Represents ownership in a corporation, indicating a claim on a portion of its assets and profits.
Special Amount Column: A journal column designated with an account title, aiding in more organized and systematic record-keeping of transactions.
Special Journal: A journal dedicated to capturing one specific type of transaction, simplifying the accounting process and improving efficiency.
Stockholder: An individual or entity owning shares in a corporation, with potential voting rights and dividends as part of their investment.
Terms of Sale: Contractual agreements outlining payment conditions between buyers and sellers, crucial for maintaining healthy business relationships.
Trade Discount: A price reduction on the list price offered to customers, typically used to encourage bulk purchases or reward loyalty.
Vendor: A supplier or business entity from which products or services are purchased, playing a vital role in the supply chain.
Wholesale Merchandising Business: Businesses that purchase goods in large quantities to resell to retail buyers, acting as intermediaries in the distribution process.

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Description

Prepare for your accounting exam with these flashcards covering key terms from Chapter 9. Each card provides essential definitions that will help you understand important concepts such as Capital Stock and Cash Discounts. Perfect for quick reviews and studying before your test.