Quiz on the Accounting Cycle of a Merchandising Business

What does merchandise refer to in a merchandising business?

• Goods held for sale to customers

• Services provided to customers

• Office equipment used by the business

• Raw materials for production

Which of the following is NOT a type of merchandiser?

• Distributor

• Manufacturer

• Retailer

• Wholesaler

What is the primary source of revenue for a merchandising firm?

• Investment income

• Interest income

• Service fees

• Sales revenue

Which inventory system uses the account title 'Purchases'?

• Perpetual Inventory System

• Periodic Inventory System

• Cash Inventory System

• Fixed Inventory System

What is a characteristic of the perpetual inventory system?

• It uses the account title 'Merchandise Inventory'

• It is used by all types of businesses

• It requires physical counts only at year-end

• It does not maintain a stock card

What does the term 'F.O.B. Shipping Point' indicate?

• The seller pays for the freight

• The buyer is not responsible for freight costs

• The buyer owns the goods while in transit

• The seller retains ownership during transit

What is a trade discount?

• A tax on merchandise

• A fee for late payment

• A reduction from the list price

• A deduction for early payment

Which account summarizes reductions from selling prices due to returns?

• Sales Discounts

• Sales Revenue

• Sales Allowances

• Sales Returns

What does 'n/30' mean in payment terms?

• Net amount due in 30 days

• No payment required for 30 days

• Payment due immediately

• 30% discount if paid in 30 days

Which of the following is a debit account in merchandising?

• Sales Returns

• Sales Revenue

• Sales Discounts

• Purchases