Accounting Spring Final Exam REVIEW

The purchases account is increased by a credit and decreased by a debit.

• True
• False

Purchases Discount is increased by a credit entry.

• True
• False

Purchases Returns and Allowances is a contra account to Cost of Merchandise.

• True
• False

The amount of sales tax collected is an asset of the business until paid to the state government.

• True
• False

A terminal summary reports total cash and credit card sales of a point-of-sale terminal.

• True
• False

Regardless of when merchandise is sold, revenue should be recorded when cash is received.

• True
• False

Total earnings are sometimes referred to as net pay or net earnings.

• True
• False

The purchases account is classified as

• a. an expense account.
• b. an asset account.
• c. a liability account.
• d. a cost account.

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

• a. Accounts Receivable is credited for the total sale and sales tax.
• b. the accounts receivable account balance is increased.
• c. Sales is debited for the price of the goods.
• d. the sales tax is not reported.

Sales discounts are recorded in a

• a. sales journal.
• b. cash receipts journal.
• c. general journal.
• d. batch report.