Accounting - Chapter 10

When merchandise is sold on account and sales tax is also collected

• Accounts Receivable is credited for the total sale and sales tax

• the Accounts Receivable balance is increased

• Sales is debited for the price of the goods

• the sales tax is not reported

Smith Company records a $3,000 sale on account on June 27. On July 10, the customer pays the account. The sale should be recorded in the

• sales journal on June 27

• cash receipts journal on June 27

• sales journal on July 10

• cash receipts journal on July 10

For a sale on account of $2,000 plus sales tax of $120, the amount recorded in the Accounts Receivable amount column of a sales journal is

• $2,000

• $880

• $2,120

• None of the above

The amount of sales tax on a sale is calculated as the price of goods

• plus the sales tax rate

• times the sales tax rate

• minus the sales tax rate

• divided by the sales tax rate

A business should post sales on account transactions to the accounts receivable subsidiary ledger frequently to

• ensure the customer is invoiced for the sale

• avoid errors in posting

• follow generally accepted accounting principles

• ensure each customer account will show an up-to-date balance

The amount of cash received for a sale on account of $2,200 when the cash is received within the 2% discount period is

• $2,244

• $2,200

• $2,156

• None of the above

Most businesses receive cash for credit and debit card sales

• at the end of the business day

• by the start of the next business day

• within 2-3 days after batching out

• on the first day of the next month

Credit terms of 2/10, n/30 mean that if the account is paid in

• 2 days, a 10% discount will be allowed

• 10 days, a 2% discount will be allowed

• 10 days, a 30% discount will be allowed

• 30 days, a 2% discount will be allowed

A batch report is a detailed report of cash sales during a specific period of time

• True

• False

Sales Tax Payable has a normal credit balance

• True

• False