Practice 5 - Accounting For Merchandising - Theories and Problem Solving
Practice 5 - Accounting For Merchandising - Theories and Problem Solving
Practice 5 - Accounting For Merchandising - Theories and Problem Solving
RVR-College of Business
Accountancy Department
FDNACCT- Fundamentals of Accountancy, Business
2. The Sales Returns and Allowances account has a normal debit balance.
A) True
B) False
Answer: True
3. The balance of the Sales Returns and Allowances account is subtracted from the balance
of the Accounts Receivable account in the Assets section of the balance sheet.
A) True
B) False
Answer: False
4. After all postings have been made, the totals of the balances in the accounts receivable
subsidiary ledger should equal the balance of the Accounts Receivable account in the
general ledger.
A) True
B) False
Answer: True
5. When a business makes a sale on a bank credit card, the business is ultimately
responsible for collecting the amount owed from the customer.
A) True
B) False
Answer: False
6. The supplier's invoice is the source document for a purchase on credit transaction.
A) True
B) False
Answer: True
7.
(7) A firm's accounts payable ledger may include accounts for creditors who are not
suppliers of merchandise.
A) True
B) False
Answer: True
(8) The entry to record the return of merchandise purchased on credit includes a debit to
Accounts Payable and a credit to Purchases Returns and Allowances.
A) True
B) False
Answer: True
(9) The Purchases Returns and Allowances account has a normal debit balance.
a. True
b. False
Answer: False
(10) Freight In and Purchases Returns and Allowances are deducted from Purchases to
determine the net delivered cost of purchases.
a. True
b. False
Answer: False – it is added to the cost of services
Answer: A
2. The Sales account is classified as a(n)
a. liability account. B) asset account.
C) expense account. D) revenue account
1) Identify the statement below that correctly describes the Sales Returns and
Allowances account.
A) It normally has a debit balance. B) It is a liability account.
C) It is an expense account. D) It normally has a credit balance.
5. To find the balance due from an individual customer, the accountant would refer to
a. the sales journal.
b. the accounts receivable subsidiary ledger.
c. the Accounts Receivable account in the general ledger.
d. the Sales account in the general ledger.
9. On the Income Statement, Sales Returns and Allowances have the effect of
a. decreasing total revenue. B) increasing total revenue.
C) increasing total expenses. D) decreasing total expenses.
12. The amount of the trade discount taken by the customer is recorded as a(n)
a. liability.
b. asset.
c. reduction to the amount recorded as a sale.
d. expense.
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13. A retailer gives an allowance to a customer for damaged merchandise.
The entry to record the allowance would include
a. A credit to Sales. B) a debit to Cash.
C) A debit to Sales Returns and Allowance D) a debit to Accounts
Receivable.
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PART 3:
Compute for the amount of (1) INVOICE PRICE (2) CASH DISCOUNTS and the (3) NET
AMOUNT for each of the independent cases.
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