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Questions and Answers
What is a record of the increases and decreases in a specific asset, liability, equity, revenue, or expense known as?
What is a record of the increases and decreases in a specific asset, liability, equity, revenue, or expense known as?
- Journal
- Account (correct)
- Posting
- Trial balance
In accounting, how are accounts receivable classified?
In accounting, how are accounts receivable classified?
- Revenue
- Equity
- Assets (correct)
- Liabilities
When a company purchases equipment on credit, what is the journal entry to record this transaction?
When a company purchases equipment on credit, what is the journal entry to record this transaction?
- Debit to Equipment for $20,100; credit to Cash for $20,100
- Debit to Cash for $20,100; credit to Equipment for $20,100
- Debit to Equipment for $20,100; credit to Equipment Expense for $20,100
- Debit to Accounts Payable for $20,100; credit to Equipment for $20,100 (correct)
Which financial statement is used to ensure that debits equal credits in the accounting records?
Which financial statement is used to ensure that debits equal credits in the accounting records?
What does an increase in account receivables indicate about a company?
What does an increase in account receivables indicate about a company?
In accounting, what does a credit to an account represent?
In accounting, what does a credit to an account represent?
What is the internal document prepared by a department manager that lists the merchandise requested to be purchased?
What is the internal document prepared by a department manager that lists the merchandise requested to be purchased?
Which document does the purchasing department use to place an order with a vendor?
Which document does the purchasing department use to place an order with a vendor?
What is the itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale called?
What is the itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale called?
Which of the following documents is typically prepared after the merchandise has been received and inspected?
Which of the following documents is typically prepared after the merchandise has been received and inspected?
What type of document lists the merchandise requested to be purchased, but is not the document used by the purchasing department to place orders with vendors?
What type of document lists the merchandise requested to be purchased, but is not the document used by the purchasing department to place orders with vendors?
Which document serves as approval for payment after an invoice has been verified?
Which document serves as approval for payment after an invoice has been verified?
In the periodic inventory system, which account is used that is not used in the perpetual inventory system?
In the periodic inventory system, which account is used that is not used in the perpetual inventory system?
What is the expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases called?
What is the expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases called?
What does the net method refer to in recording?
What does the net method refer to in recording?
Which of the following is NOT an account used in the periodic inventory system?
Which of the following is NOT an account used in the periodic inventory system?
What does the net method of recording purchases involve?
What does the net method of recording purchases involve?
Which expense results from not taking advantage of cash discounts in the net method of recording purchases?
Which expense results from not taking advantage of cash discounts in the net method of recording purchases?
Which of the following is NOT revealed by maintaining separate accounts receivable information for each customer?
Which of the following is NOT revealed by maintaining separate accounts receivable information for each customer?
Why do sellers allow customers to use bank (or third-party) credit cards?
Why do sellers allow customers to use bank (or third-party) credit cards?
What is a primary purpose of maintaining separate accounts receivable information for each customer?
What is a primary purpose of maintaining separate accounts receivable information for each customer?
Why might sellers allow customers to use bank (or third-party) credit cards?
Why might sellers allow customers to use bank (or third-party) credit cards?
What information does maintaining separate accounts receivable for each customer NOT provide?
What information does maintaining separate accounts receivable for each customer NOT provide?
What is a significant benefit of maintaining separate accounts receivable information for each customer?
What is a significant benefit of maintaining separate accounts receivable information for each customer?
What method is used for accounting for bad debts when a company writes off the debt after it is deemed uncollectible?
What method is used for accounting for bad debts when a company writes off the debt after it is deemed uncollectible?
When a note receivable is honored, what does it mean?
When a note receivable is honored, what does it mean?
What is the term used when a promissory note's maker fails to pay the amount due when it matures?
What is the term used when a promissory note's maker fails to pay the amount due when it matures?
Which of the following methods involves estimating and setting aside an allowance for potential bad debts before they occur?
Which of the following methods involves estimating and setting aside an allowance for potential bad debts before they occur?
What is the name given to the process of reducing the recorded value of a promissory note in anticipation of potential losses?
What is the name given to the process of reducing the recorded value of a promissory note in anticipation of potential losses?
Which method records bad debts only when they are confirmed as uncollectible, without prior estimation or provisioning?
Which method records bad debts only when they are confirmed as uncollectible, without prior estimation or provisioning?
Study Notes
Accounting Basics
- A record of increases and decreases in a specific asset, liability, equity, revenue, or expense is known as an account.
- Accounts receivable is classified as a current asset in accounting.
Journal Entries
- When equipment is purchased on credit, the journal entry involves debiting the Equipment account and crediting Accounts Payable.
Financial Statements
- The trial balance is used to ensure that debits equal credits in the accounting records.
Accounts Receivable Insights
- An increase in accounts receivable suggests that a company is extending more credit to customers, potentially indicating higher sales but also risking cash flow issues.
- A credit to an account typically represents an increase in liabilities or decrease in assets.
Purchasing and Inventory Documents
- An internal purchase requisition is prepared by a department manager and lists requested merchandise.
- The document used by the purchasing department to place an order with a vendor is the purchase order.
Vendor Documentation
- A vendor invoice is an itemized statement listing the customer's name, items sold, sales prices, and terms of sale.
- A receiving report is typically prepared after merchandise has been received and inspected.
Inventory Systems
- In the periodic inventory system, the Purchases account is used, which is not utilized in the perpetual inventory system.
Cash Discounts and Recording Methods
- The expense from missing cash discounts when using the net method of recording purchases is known as lost cash discounts.
- The net method refers to recording purchases at the amount after cash discounts are deducted.
- The periodic inventory system does not use the Cost of Goods Sold (COGS) account.
Accounts Receivable Management
- Maintaining separate accounts receivable information for each customer allows sellers to track payment performance and manage credit effectively.
- Sellers allow customers to use bank (or third-party) credit cards to increase sales and facilitate easier transactions.
Bad Debts Accounting
- The direct write-off method is used for accounting bad debts when the debt is deemed uncollectible after it has occurred.
- When a note receivable is honored, it means the borrower has made the payment as promised.
- When a promissory note's maker fails to pay the amount due at maturity, it is termed default.
- The allowance method involves estimating and setting aside potential bad debts before they occur.
- The process of reducing the recorded value of a promissory note in anticipation of potential losses is referred to as discounting.
- The direct write-off method records bad debts only when confirmed as uncollectible, without prior estimation.
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Description
This quiz covers the classification of accounts receivable as assets and how they are increased by billings to customers. It also touches on the use of accounts in recording transactions.
