Chapter 2 Study Guide

Records of departmental operating expenses are necessary to determine departmental gross profit from operations.

False

In a departmental business, each sales invoice shows the amount of merchandise sold by the department.

True

Preparing two copies of a sales invoice provides a copy for the customer and a copy for the business to use for journalizing the transaction.

True

Each departmental sales journal entry is posted individually as a credit to the appropriate customer's account.

False

After posting a line of a departmental sales journal, the customer number is recorded in the journal's Post. Ref. column.

True

The vendor prepares a debit memorandum for a sales returns and allowances transaction.

False

An account showing deductions from a sales account is known as a contra cost account.

False

A cash discount on a sale taken by the customer is called a sales discount.

True

A departmental cash receipts journal contains a Cash Debit column for each department.

False

Both the debit part and the credit parts of a cash or credit card sales transaction are entered in special amount columns in a departmental cash receipts journal.

True

Each amount in the Accounts Receivable Credit column of a departmental cash receipts journal is posted individually to the accounts receivable ledger.

True

Each amount in the Accounts Receivable Credit column of a departmental cash receipts journal is posted when the transaction is recorded in the cash receipts journal.

True

Each amount in the Cash Debit column of a departmental cash receipts journal is posted individually to the debit side of the Cash account.

False

The total of each Sales Credit column of a departmental cash receipts journal is posted to a general ledger account.

True

After the totals of special amount columns have been posted, the general ledger account numbers are written in parentheses below the totals of the special columns in the cash receipts journal.

True

One item of information available through a departmental accounting system is the (A) net income or net loss for each department (B) gross profit from operations for each department (C) administrative expenses for each department (D) total operating expenses for each department.

(B) gross profit from operations for each department.

The source document for recording a transaction in a departmental sales journal is (A) a cash register tape (B) a memorandum (C) a sales invoice (D) an adding machine tape.

(C) a sales invoice

Recording all sales at the time of sale, regardless of when payment is made, is an application of the (A) Going Concern concept (B) Realization of Revenue concept (C) Matching Expenses with Revenue concept (D) Historical Cost concept.

(B) Realization of Revenue concept

When audio equipment subject to sales tax is sold on account, Accounts Receivable is (A) debited for the amount of merchandise sold (B) debited for the amount of merchandise sold plus the sales tax on the merchandise (C) credited for the amount of merchandise sold (D) not affected.

(B) debited for the amount of merchandise sold plus the sales tax on the merchandise

In a departmental business, when audio equipment is sold on account, (A) Sales is debited (B) Sales—Audio is debited (C) Sales is credited (D) Sales—Audio is credited.

(D) Sales - Audio is credited

Each amount in the Accounts Receivable Debit column of a departmental sales journal is (A) posted as a debit to a customer's account (B) posted as a credit to a customer's account (C) posted to a controlling account (D) not posted.

(A) posted as a debit to a customer's account

The total of each column in a departmental sales journal is (A) posted daily (B) posted weekly (C) posted at the end of the month (D) posted when the page is filled or at the end of the month.

(D) posted when the page is filled or at the end of the month

The account credited when a customer returns merchandise or is granted an allowance is (A) Accounts Payable (B) Sales Returns (C) the appropriate departmental sales account (D) none of these.

(D) none of these

The source document for a sales returns and allowances transaction is (A) a sales invoice (B) a debit memorandum (C) a credit memorandum (D) none of these.

(C) a credit memorandum

Sales returns and allowances are posted (A) monthly to a customer's account in the general ledger (B) frequently to a customer's account in the general ledger (C) monthly to a customer's account in the accounts receivable ledger (D) to the customer's account in the accounts receivable ledger and the general ledger when the transaction is journalized.

(D) to the customer's account in the account receivable ledger and the general ledger when the transaction is journalized

A business offers a sales discount (A) because of state laws (B) to encourage early payment (C) to get repeat business from the customer (D) none of these.

(B) to encourage early payment

The terms 2/10, n/30 mean (A) a 2% sales discount may be deducted if sales on account are paid within 30 days of the invoice date (B) a 2% sales discount may be deducted if sales on account are paid within 10 days (C) all sales on account must be paid within 30 days (D) B and C.

(D) B and C

Credit card sales are recorded in the cash receipts journal because (A) the cash is usually deposited in the cash account in two or three days (B) government policy requires immediate payment (C) credit card companies are not included in the accounts receivable ledger (D) this procedure is the first step in collecting from credit card companies.

(A) the cash is usually deposited in the cash account in two or three days