accounting chapter 9

The subsidiary ledger containing vendor accounts. (p. 246)

Accounts Payable Ledger

An account in a general ledger that summarizes all accounts in a subsidiary ledger. (p. 246)

Controlling Account

The legal right for a business to conduct operations as a corporation. (p. 244)

Charter

A business from which merchandise, supplies, or other assets are purchased. (p. 246)

Vendor

A ledger that is summarized in a single general ledger account. (p. 246)

subsidiary ledger

A list of assets, usually containing the value of individual items. (p. 249)

inventory

Goods that a business purchases in order to sell. (p. 244)

merchandise

A business that purchases and resells goods. (p. 244)

Merchandising business

A merchandising business that sells to those who use or consume the goods. (p. 244)

Retail merchandising business

A business that buys and resells merchandise primarily to other merchandising businesses. (p. 244)

wholesale merchandising business

An organization with the legal rights of a person which many persons or other corporations may own. (p. 244)

Corporation

The assets or other financial resources available to a business. (p. 244)

Capital

Each unit of ownership in a corporation. (p. 244)

Share of stock

The owner of one or more shares of stock. (p. 244)

Stockholder

The total shares of ownership in a corporation. (p. 244)

Capital stock

A legal document that identifies basic characteristics of a corporation. (p. 244)

articles of incorporation

The goods a business has on hand for sale to customers. (p. 249)

merchandise inventory

An inventory determined by keeping a continuous record of increases, decreases, and the balance on hand of each item of merchandise. (p. 249)

Perpetual inventory

A merchandise inventory evaluated at the end of a fiscal period. (p. 249)

periodic inventory

When a periodic inventory is conducted by counting, weighing, or measuring items of merchandise on hand. (p. 249)

physical inventory

The amount a business pays for goods it purchases to sell. (p. 250)

cost of merchandise

A form requesting the purchase of merchandise. (p. 251)

Requisition

A form requesting that a vendor sell merchandise to a business. (p. 251

purchase order

A journal used to record only one kind of transaction. (p. 251)

Special Journal

A transaction in which the items purchased are to be paid for later. (p. 252)

Purchase on Account

A special journal used to record only purchases of merchandise on account. (p. 252)

purchases journal

A journal amount column headed with an account title. (p. 252)

special amount column

An invoice used as a source document for recording a purchase on account transaction. (p. 252)

Purchase Invoice

An agreement between a buyer and a seller about payment for merchandise. (p. 252)

terms of sale

The date by which an invoice must be paid. (p. 252)

Due Date

A special journal used to record only cash payment transactions. (p. 260)

cash payments journal

The retail price listed in a catalog or on an Internet site. (p. 260)

List price

A reduction in the list price granted to a merchandising business. (p. 260)

Trade discount

The price after the trade discount has been deducted from the list price. (p. 260)

Net Price

A deduction that a vendor allows on an invoice amount to encourage prompt payment. (p. 260)

Cash Discount

A journal amount column that is not headed with an account title. (p. 260)

general amount column

The period of time during which a customer may take a cash discount. (p. 263)

discount period

When a company that has purchased merchandise on account takes a cash discount. (p. 263)

purchases discount

An account that reduces a related account on a financial statement. (p. 263)

Contra Account

The maximum outstanding balance allowed to a customer by a vendor. (p. 267)

Credit Limit

A listing of vendor accounts, account balances, and the total amount due to all vendors. (p. 272)

Schedule of accounts payable

A corporation can incur liabilities but cannot own property. (p. 244)

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The articles of incorporation typically include the name and address of the business, its purpose for operating, any limitations on its activities, and rules for dissolving the corporation. (p. 244)

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Unlike a proprietorship, a corporation exists independent of its owners. (p. 245)

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4. The total of accounts in the accounts payable ledger equals the balance of the controlling account, Accounts Payable. (p. 246)

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5. The accounts payable ledger form contains the same columns as the general ledger except that it lacks a Credit Balance column. (p. 247)

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6. When a perpetual inventory system is used, purchases of merchandise are accounted for directly to Merchandise Inventory. (p. 249)

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7. The perpetual inventory method is easier to maintain than the periodic method. The perpetual method does not require records of the quantity and cost of individual goods. (p. 249)

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8. When a periodic inventory system is used, the cost of merchandise is recorded to Purchases. (p. 250)

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9. The income statement of a merchandising business places Purchases in a section titled Cost of Goods Sold, separate from other expenses. (p. 250)

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10. A purchase invoice lists the quantity, the description, and the price of each item and shows the total amount of the purchase. (p. 253)

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11. A transaction to record merchandise purchased with a trade discount would include a credit to Merchandise Discount. (p. 260)

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12. When journalizing a cash payment for advertising, the vendor's name is written in the Account Title column of the cash payments journal. (p. 261)

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13. When supplies are purchased for use in the business, the amount is recorded as a debit to Purchases. (p. 262)

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14. The terms of sale 2/15, n/30 mean that 2% of the invoice amount may be deducted if paid within 15 days of the invoice date or the total invoice amount must be paid within 30 days. (p. 263)

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15. The contra account Purchases Discount has a normal credit balance. (p. 263)

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16. The petty cash account Cash Short and Over is a permanent account. (p. 265)

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17. Exceeding a vendor's credit limit can cause a disruption in the company's ability to purchase merchandise. (p. 267)

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18. A journal is proved and ruled whenever a journal page is filled, and always at the end of a month. (p. 269)

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19. The totals of the General amount columns of a cash payments journal are posted to the general ledger. (p. 270)

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20. The total of an accounts payable trial balance should equal the total of Accounts Payable. (p. 272)

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