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Questions and Answers
What are goods that a business purchases in order to sell called?
What are goods that a business purchases in order to sell called?
What is a merchandising business?
What is a merchandising business?
A business that purchases and resells goods.
Define a retail merchandising business.
Define a retail merchandising business.
A merchandising business that sells to those who use or consume goods.
What is a wholesale merchandising business?
What is a wholesale merchandising business?
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What does the term 'corporation' refer to?
What does the term 'corporation' refer to?
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What is capital in a business context?
What is capital in a business context?
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What is a share of stock?
What is a share of stock?
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Who is a stockholder?
Who is a stockholder?
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What is capital stock?
What is capital stock?
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What are Articles of Incorporation?
What are Articles of Incorporation?
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What is a charter in a business context?
What is a charter in a business context?
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What does the term vendor refer to?
What does the term vendor refer to?
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What is a subsidiary ledger?
What is a subsidiary ledger?
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What is an accounts payable ledger?
What is an accounts payable ledger?
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What is a controlling account?
What is a controlling account?
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Define inventory.
Define inventory.
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What is merchandise inventory?
What is merchandise inventory?
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What is perpetual inventory?
What is perpetual inventory?
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What is periodic inventory?
What is periodic inventory?
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What is physical inventory?
What is physical inventory?
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Define the cost of merchandise.
Define the cost of merchandise.
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What is a requisition?
What is a requisition?
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What is a purchase order?
What is a purchase order?
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What is a special journal?
What is a special journal?
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What does purchase on account mean?
What does purchase on account mean?
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What is a purchases journal?
What is a purchases journal?
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What is a special amount column?
What is a special amount column?
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What is a purchase invoice?
What is a purchase invoice?
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What are terms of sale?
What are terms of sale?
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What does due date mean in a business transaction?
What does due date mean in a business transaction?
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What is a cash payments journal?
What is a cash payments journal?
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What is list price?
What is list price?
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Define trade discount.
Define trade discount.
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What is net price?
What is net price?
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What is a cash discount?
What is a cash discount?
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What is a general amount column?
What is a general amount column?
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What is a discount period?
What is a discount period?
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What is a purchases discount?
What is a purchases discount?
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Define contra account.
Define contra account.
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What is a credit limit?
What is a credit limit?
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What is a schedule of accounts payable?
What is a schedule of accounts payable?
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A corporation can incur liabilities but cannot own property.
A corporation can incur liabilities but cannot own property.
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The articles of incorporation typically include the name and address of the business, its purpose for operating, any limitations on its activities and rules for dissolving the corporation.
The articles of incorporation typically include the name and address of the business, its purpose for operating, any limitations on its activities and rules for dissolving the corporation.
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Unlike a proprietorship, a corporation exists independent of its owners.
Unlike a proprietorship, a corporation exists independent of its owners.
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The total of accounts in the accounts payable ledger equals the balance of the controlling account, Accounts Payable.
The total of accounts in the accounts payable ledger equals the balance of the controlling account, Accounts Payable.
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The accounts payable ledger form contains the same columns as the general ledger except that it lacks a Debit Balance column.
The accounts payable ledger form contains the same columns as the general ledger except that it lacks a Debit Balance column.
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When a perpetual inventory system is used, purchases of merchandise are accounted for directly to Merchandise Inventory.
When a perpetual inventory system is used, purchases of merchandise are accounted for directly to Merchandise Inventory.
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The perpetual inventory is not easier to maintain than the periodic method. The perpetual method requires records of the quantity and cost of individual goods.
The perpetual inventory is not easier to maintain than the periodic method. The perpetual method requires records of the quantity and cost of individual goods.
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When a periodic inventory system is used, the cost of merchandise is recorded to Purchases.
When a periodic inventory system is used, the cost of merchandise is recorded to Purchases.
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The income statement of a merchandising business places Purchases in a section titled Cost of Goods Sold, separate from other expenses.
The income statement of a merchandising business places Purchases in a section titled Cost of Goods Sold, separate from other expenses.
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A purchase invoice lists the quantity, the description, and the price of each item and shows the total amount of the purchase.
A purchase invoice lists the quantity, the description, and the price of each item and shows the total amount of the purchase.
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A transaction to record merchandise purchased with a trade discount would include a credit to Merchandise Discount.
A transaction to record merchandise purchased with a trade discount would include a credit to Merchandise Discount.
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When journalizing a cash payment for advertising expense, the vendor's name is not written in the Account Title column of the cash payments journal.
When journalizing a cash payment for advertising expense, the vendor's name is not written in the Account Title column of the cash payments journal.
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When supplies are purchased for use in the business, the amount is recorded as a debit to Purchases.
When supplies are purchased for use in the business, the amount is recorded as a debit to Purchases.
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The terms of sale 2/15, n/30 mean that 2% of the invoice amount may be deducted if paid within 15 days of the invoice date or the total invoice amount must be paid within 30 days.
The terms of sale 2/15, n/30 mean that 2% of the invoice amount may be deducted if paid within 15 days of the invoice date or the total invoice amount must be paid within 30 days.
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The contra account Purchases Discount has a normal credit balance.
The contra account Purchases Discount has a normal credit balance.
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The petty cash account Cash Short and Over is a permanent account.
The petty cash account Cash Short and Over is a permanent account.
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Exceeding a vendor's credit limit can cause a disruption in the company's ability to purchase merchandise.
Exceeding a vendor's credit limit can cause a disruption in the company's ability to purchase merchandise.
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A journal is proved and ruled whenever a journal page is filled, and always at the end of a month.
A journal is proved and ruled whenever a journal page is filled, and always at the end of a month.
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The total of the General amount columns of a cash payments journal are not posted to the general ledger.
The total of the General amount columns of a cash payments journal are not posted to the general ledger.
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The total of an accounts payable trial balance should equal the total of Accounts Payable.
The total of an accounts payable trial balance should equal the total of Accounts Payable.
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What is the proper journal entry for purchasing merchandise on account from Walner Electric?
What is the proper journal entry for purchasing merchandise on account from Walner Electric?
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What is the journal entry for paying cash for rent?
What is the journal entry for paying cash for rent?
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What is the journal entry when cash is paid to Triangle Suppliers for supplies?
What is the journal entry when cash is paid to Triangle Suppliers for supplies?
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What is the journal entry for purchasing merchandise from Zaben Corp. for cash?
What is the journal entry for purchasing merchandise from Zaben Corp. for cash?
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What is the journal entry for paying cash on account to Walner Electric, less purchases discount?
What is the journal entry for paying cash on account to Walner Electric, less purchases discount?
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What is the journal entry for paying cash on account to Triangle Suppliers?
What is the journal entry for paying cash on account to Triangle Suppliers?
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What is the journal entry for paying cash to replenish the petty cash fund?
What is the journal entry for paying cash to replenish the petty cash fund?
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Study Notes
Merchandise and Business Types
- Merchandise refers to goods acquired by a business for resale.
- A merchandising business engages in purchasing and reselling goods.
- Retail merchandising businesses sell directly to consumers who use or consume the goods.
- Wholesale merchandising businesses purchase goods with the intent to resell primarily to other businesses.
Corporation Fundamentals
- A corporation possesses legal rights similar to an individual and can be owned by multiple persons or entities.
- Capital represents the assets or financial resources that a business utilizes.
- Shares of stock denote units of ownership within a corporation.
- Stockholders are individuals or entities that own one or more shares of stock.
- Capital stock refers to the total number of shares issued by a corporation.
- Articles of incorporation provide basic details about a corporation, including its name, purpose, and operational limitations.
- A charter grants a corporation the legal authority to operate.
Vendor and Ledger Concepts
- Vendors are businesses from which merchandise or supplies are acquired.
- A subsidiary ledger summarizes detailed accounts under a single general ledger account.
- The accounts payable ledger specifically contains vendor accounts.
- A controlling account consolidates all subsidiary ledger accounts into a single entry in the general ledger.
Inventory Management
- Inventory is an asset list that includes the valuation of individual items.
- Merchandise inventory refers to goods available for sale to customers.
- Perpetual inventory maintains continuous records of stock changes and current balance.
- Periodic inventory assesses goods at the end of a financial period, while physical inventory involves a physical count of stock.
Purchase Processes and Documentation
- The cost of merchandise is the expense incurred to acquire goods for resale.
- A requisition is a formal request for purchasing merchandise.
- A purchase order is a document sent to a vendor to request merchandise.
- Special journals are designated for recording specific transaction types, like purchases.
- Transactions involving merchandise purchases on account entail future payment promises.
Discounting and Payment Terms
- The list price is the retail price found in catalogs or online.
- Trade discounts reduce the list price for merchandising businesses.
- Net price is the final price after applying any trade discounts.
- Cash discounts incentivize prompt payment from purchasers.
- Terms of sale detail payment conditions, typically expressed as a ratio and time frame.
- Due dates specify when an invoice payment is required.
Journal Types and Account Management
- The cash payments journal is specifically for recording cash transactions.
- The special amount column in journals is headed by an account title.
- A purchases journal records all merchandise purchases made on account.
- A purchase invoice serves as the basis for documenting account purchases.
Account Balances and Transparency
- The controlling account balance should match the total of accounts in the accounts payable ledger.
- An account’s balance is verified to ensure correctness at month-end.
- Temporary accounts, like Cash Short and Over, differ from permanent accounts in terms of reporting.
- Exceeding a vendor's credit limit can hinder a business's ability to procure merchandise.
Financial Transactions Examples
- Purchase transactions on account and cash payments are recorded in respective journals, detailing debits and credits involved.
- Examples provided show how to document specific transactions such as purchasing and paying for merchandise, reinforcing practical understanding.
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Description
This quiz covers essential concepts of merchandising and corporate structures. Learn about the differences between retail and wholesale businesses, as well as the basic rights and responsibilities of corporations. Understand capital, shares of stock, and articles of incorporation essential for business operations.
