Accounting Chapter 7 Review

A merchandising business is a business that earns its revenue by buying goods and then reselling these goods to customers.

• True
• False

A purchase requisition is shipped with the goods from the seller to the buyer.

• True
• False

A cash discount is a discount offered to encourage prompt and early payment by a buyer.

• True
• False

A cash discount of 2/10,n/30 indicates that the buyer may deduct 10% of the invoice price if payment is made within two days.

• True
• False

The purchases journal is used to record only credit purchases of merchandise.

• True
• False

After all postings have been made, the sum of the balances of the creditors’ accounts in the accounts payable ledger should equal the balance of the Accounts Payable account in the general ledger.

• True
• False

The Purchases Returns and Allowances account is contra to the Purchases account.

• True
• False

Each amount appearing in the General Debit column of the cash payments journal must be posted to the general ledger account named in the Account Debited column.

• True
• False

The Jackson’s Garden Supplies floor manager determines that they are running low on rose bushes and need to reorder. What document will the manager send to the purchasing department?

• Purchase order
• Sales order
• Purchase requisition
• Sales requisition

Fit-Right Shoes purchases merchandise with a list value of $2,500 and is offered a 10% trade discount. The amount that Fit-Right Shoes should record in the journal is a debit to Purchases for

• $2,500
• $2,250
• $2,000
• $2,750