Accounting 1 - 4.01 & 4.02 Review

Front

True or False: Retailers include clothing stores, CD and tape shops, and automobile dealerships.

Back

True

Answer explanation

True. Retailers encompass various types of stores, including clothing stores, CD and tape shops, and automobile dealerships, as they all sell goods directly to consumers.

Front

True or False: The account Merchandise Inventory is classified in the chart of accounts as an asset.

Back

True

Answer explanation

True. Merchandise Inventory is classified as an asset on the balance sheet because it represents goods available for sale, which have future economic benefits.

Front

True or False: A sale on account is paid for in cash when the merchandise is sold.

Back

False

Answer explanation

False. A sale on account means the customer buys on credit and will pay later, not in cash at the time of sale.

Front

True or False: A sales slip is usually prepared in multiple copies with the customer receiving the original and the business keeping the remaining copies.

Back

True

Answer explanation

True. A sales slip is typically prepared in multiple copies: the customer receives the original, while the business retains the other copies for record-keeping and accounting purposes.

Front

True or False: Sales taxes are not usually charged to governmental agencies.

Back

True

Answer explanation

True. Sales taxes are generally not charged to governmental agencies because they are considered tax-exempt entities, meaning they do not pay sales tax on purchases related to their governmental functions.

Front

True or False: In a merchandising business, the most frequent type of transaction is the sale of merchandise.

Back

True

Answer explanation

True. In a merchandising business, the primary activity is buying and selling goods, making the sale of merchandise the most frequent type of transaction.

Front

True or False: Electrical supply companies, auto parts distributors, and food supply companies are examples of wholesalers.

Back

True

Answer explanation

True. Electrical supply companies, auto parts distributors, and food supply companies purchase goods in bulk and sell them to retailers or other businesses, making them wholesalers.

Front

True or False: Two of the accounts used by merchandising businesses are Merchandise Inventory and Professional Fees.

Back

False

Answer explanation

False is correct because Professional Fees is not a typical account for merchandising businesses. They primarily use Merchandise Inventory and Sales Revenue.

Front

True or False: The cash register tape is the source document for the journal entry to record the day's cash sales.

Back

True

Answer explanation

True. The cash register tape provides a detailed record of the day's cash sales, serving as the source document for the journal entry to accurately reflect these transactions.

Front

True or False: A sales discount increases the revenue account Sales.

Back

False

Answer explanation

False. A sales discount reduces the amount of revenue recognized in the Sales account, as it represents a reduction in the selling price offered to customers.