FABM 2 - Unit Review No. 3

All sales, for cash or on credit, can be recorded in the general journal.

• True

• False

Reductions in the price of merchandise granted by the seller because of defects or other problems with the merchandise are called purchase returns & allowances.

• TRUE

• FALSE

Purchase Discount and Purchase Returns and Allowances are contra-sales account.

• TRUE

• FALSE

Cash discounts are offered to encourage prompt payment by customers who buy on account.

• TRUE

• FALSE

2, 1/10, n/30

The 2 in the term above is an example of a cash discount.

• TRUE

• FALSE

2/10 EOM, N/60

What do you mean by this term?

Answer explanation

2% discount is given until the 10th day after the end of the month. For example: A purchase of merchandise on account on July 1 will still have a discount until August 10.

Purchases is an account under

(a)  

Match the following account titles to its rightful category.

• Expense

• Sales

• Buyer

• Sales Returns and Allowances

• Income

• FOB Shipping Point

• Contra-Sales

• FOB Destination

• Seller

• Freight-In

Label the journal correctly. Below are the journal entries.

June 1 - Purchased merchandise from Sullivan Co. P234,500. Terms: 1, 2/10, n/30

a

b

c

P232,155

Accounts Payable

Purchases

A sales invoice prepared by the seller is called purchase invoice by the buyer.

• TRUE

• FALSE