WorksheetsFABM2 Reviewer/mock test
Total questions: 45
Worksheet time: 23mins
Which of the following best describes a merchandising business?
Engaged in providing services to customers
Involved in the buying and selling of merchandise or goods
Primarily focused on manufacturing products
Specialized in offering consulting solutions
What is the primary source of goods for a merchandising business?
Direct purchase from customers
Production within the company
Acquisition from wholesalers or manufacturers
Donation from charitable organizations
Which type of merchandiser typically purchases goods in bulk directly from manufacturers?
Retailer
Consumer
Wholesaler
Distributor
What is the primary difference between a wholesaler and a retailer?
Wholesalers sell products to end users, while retailers buy in bulk from manufacturers.
Retailers buy in bulk directly from manufacturers, while wholesalers sell products to end users.
Wholesalers buy in bulk directly from manufacturers, while retailers sell products to end users.
Retailers sell products to other businesses, while wholesalers buy directly from consumers.
They sell products to end users
Retailers
Wholesaler
Consumer
Distributor
What system is typically used by small businesses where updates to inventory accounts are made periodically?
Continuous system
Perpetual system
Periodic system
Incremental system
In a periodic inventory system, when merchandise is purchased, where is the cost recorded?
Inventory account
Purchases account
Sales account
Revenue account
Which account is used to record sales in a periodic inventory system?
Inventory account
Purchases account
Sales account
Cost of Goods Sold account
In a periodic inventory system, when is the determination of Cost of Goods Sold (COGS) typically made?
At the time of sale
Continuously throughout the accounting period
At the beginning of the accounting period
At the end of the accounting period
What is the purpose of adjusting entries in a periodic inventory system?
To record daily sales transactions
To determine the beginning inventory
To calculate net purchases
To reflect the actual Cost of Goods Sold and adjust inventory at the end of the period
Which of the following is an advantage of the periodic inventory system?
Real-time information on inventory levels
Complex record-keeping requirements
Simplicity in managing inventory and cost effective
Higher transaction volumes
What is a disadvantage of the periodic inventory system regarding information availability?
Provides real-time information on inventory levels
Requires continuous record-keeping
Lacks real-time information on inventory levels and COGS
Decreases risk of errors
What risk is associated with the periodic inventory system in terms of accuracy?
Decreased risk of errors
Increased risk of discrepancies in determining ending inventory and COGS
Real-time information availability
Simplicity in managing inventory
In terms of income tax implications, which system may be more suitable for certain businesses?
Perpetual system
Both systems have the same implications
No implications on income tax reporting
Periodic system
Which system allows for real-time updates and tracking of changes in inventory?
Perpetual system
Periodic system
Incremental system
Static system
What type of systems enable automatic updates of inventory levels as sales are made?
Inventory management systems
Point-of-sale (POS) systems
Purchasing systems
Accounting systems
How does the perpetual system handle the recording of purchases?
It does not record purchases
Purchases are recorded at the end of the accounting period
The cost of goods is immediately recorded in the Inventory account
Purchases are recorded in a temporary Purchases account
With each sale, what does the perpetual system deduct from the Inventory account?
Sales revenue
Cost of goods sold (COGS)
Purchases
Accounts payable
Which inventory valuation methods can be used with the perpetual system?
FIFO and LIFO
LIFO and Average Cost
FIFO and Weighted Average
Average Cost and Specific Identification
How do financial statements reflect inventory information in the perpetual system?
They provide real-time information only on sales revenue
They reflect real-time information about inventory costs and values
They only include inventory information at the end of the accounting period
They exclude inventory information entirely
What advantage does the perpetual system offer in terms of inventory turnover analysis?
It doesn't allow for inventory turnover analysis
It provides static data for analysis
It enables easy calculation and analysis of inventory turnover ratios
It requires extensive physical inventory counts for analysis
How does the perpetual system contribute to loss prevention?
By ignoring discrepancies and potential issues
By minimizing the risk of losses through proactive addressing of discrepancies
By increasing the likelihood of losses due to outdated inventory information
By solely relying on physical inventory counts
Which aspect of technology integration does the perpetual system emphasize?
Integration with social media platforms
Integration with inventory tracking systems
Integration with transportation management systems
Integration with employee scheduling software
How does the perpetual system enhance auditing and accuracy?
By increasing the need for extensive physical inventory counts
By reducing the accuracy of financial records
By enhancing the accuracy of financial records and reducing the need for extensive physical inventory counts
By excluding the need for auditing entirely
Which of the following best describes a trade discount?
A deduction granted to encourage prompt payment of accounts
A reduction from the list price to encourage customer to buy more quantities
A deduction recorded as purchase discount in the buyer's book
A reduction from the list price to encourage future purchases
How is a trade discount typically recorded?
Recorded as a purchase discount in the buyer's book
Directly shown as the discounted price in the book of accounts
Recorded as a sales discount in the seller's book
Excluded from the accounting records entirely
What type of discount is granted to encourage prompt payment of accounts?
Trade discount
Cash discount
Purchase discount
Sales discount
How is a cash discount recorded in the buyer's book?
Recorded as a sales discount
Recorded as a trade discount
Recorded as a purchase discount
Directly shown as the discounted price in the book of accounts
What is the primary purpose of a cash discount?
To encourage future purchases
To encourage prompt payment of accounts
To reduce the list price for bulk purchases
o incentivize customer loyalty
Which account is used by the buyer to record the cost of goods or merchandise brought?
Purchases Return and Allowances
Purchase Discounts
Purchases
Freight-in
What account is utilized to record returns and allowances granted by the seller to the buyer?
Purchases Return and Allowances
Purchase Discounts
Purchases
Freight-in
What does the Purchase Discounts account represent from the buyer's perspective?
Reduction from the purchase price granted to the seller
Reduction from the purchase price granted to the buyer after paying within the discount period
Additional cost incurred during transportation
Cost of goods or merchandise brought
What does the Freight-in account represent for the buyer?
Reduction from the purchase price granted to the seller
Reduction from the purchase price granted to the buyer after paying within the discount period
Additional cost incurred during transportation
Cost of goods or merchandise brought
What account is credited to record the price of goods sold from the seller's perspective?
Sales Return and Allowances
Sales Discounts
Sales
Freight-out
Which account is used by the seller to record returns and allowances granted to buyers?
Sales Return and Allowances
Sales Discounts
Sales
Freight-out
What does the Sales Discounts account represent from the seller's perspective?
Additional revenue earned from sales
Additional cost incurred during transportation
Reduction from the sales price granted to the buyer after paying within the discount period
Cost of goods sold
What does the Freight-out account represent for the seller?
Additional revenue earned from sales
Additional cost incurred during transportation
Reduction from the sales price granted to the buyer after paying within the discount period
Cost of goods sold
In a perpetual inventory system, what account is debited when merchandise is acquired?
Purchases account
Sales account
Merchandise Inventory account
Cost of Goods Sold account
When merchandise is sold in a perpetual system, what account is credited?
Purchases account
Sales account
Merchandise Inventory account
Cost of Goods Sold account
Why is no purchases account maintained in a perpetual system?
Because the inventory account is directly credited with each purchase of merchandise
Because the sales account records all purchase transactions
Because purchases are directly recorded in the Cost of Goods Sold account
Because purchases are not relevant to the perpetual inventory system
When are closing entries typically made?
At the beginning of the accounting period
Throughout the accounting period
At the end of the accounting period
Only when requested by external auditors
What is the purpose of closing entries?
To open new accounts for the next accounting period
To transfer balances from permanent accounts to temporary accounts
To transfer balances from temporary accounts to permanent accounts
To reconcile bank statements
Which type of accounts show balances over a single accounting period?
Temporary accounts
Permanent accounts
Capital accounts
Liability accounts
What is the purpose of the Income Summary account in closing entries?
To record all income and expenses throughout the accounting period
To serve as a temporary account used to make closing entries
To represent the final net income or loss for the period
To record withdrawals made by the owner
What is the significance of the Post-Closing Trial Balance?
To verify that all permanent accounts have been closed
To ensure that all temporary accounts have been closed properly
To check if the company has enough cash reserves
To calculate the total revenue for the period
