acc topic 5

What are the learning objectives of the topic 'Accounting for Merchandising Businesses'?

• LO1: Distinguish between the activities and financial statements of service and merchandising businesses.

• LO3: Describe and illustrate the financial statements of a merchandising business.

• LO4: Describe the adjusting and closing process for a merchandising business.

• LO2: Describe and illustrate the accounting for merchandise transactions.

What is the operating cycle for a merchandising business?

• The process by which a company sells merchandise to customers.

• The process by which a company purchases merchandise for sale to customers.

• The time in days to complete an operating cycle differs significantly among merchandise businesses.

• The process by which a company spends cash, generates revenues, and receives cash either at the time the revenues are generated or later by collecting an accounts receivable.

What is the difference between the financial statements of service and merchandising businesses?

• Service businesses report net income, while merchandising businesses report gross profit.

• Service businesses report fees earned, while merchandising businesses report sales.

• Service businesses report sales, while merchandising businesses report fees earned.

• Service businesses report gross profit, while merchandising businesses report net income.

What is the advantage of using a perpetual inventory system?

• All of the above

• Continuous determination of inventory value

• Affordable with computers, scanners, and bar codes on most products

• Provides management controls

What is the entry to record a purchase return in a perpetual inventory system?

• Debit Sales, Credit Accounts Receivable

• Debit Accounts Receivable, Credit Sales

• Debit Accounts Payable, Credit Merchandise Inventory

• Debit Merchandise Inventory, Credit Accounts Payable

What are the terms for when payments for merchandise are to be made?

• Credit period

• None of the above

• Cash or net cash

• Both A and B

What is the purpose of offering a cash discount to buyers?

• To increase the cost of the merchandise purchased

• To delay the payment for the merchandise purchased

• To encourage the buyer to pay before the end of the credit period

• To reduce the cost of the merchandise purchased

What is the purpose of a sales discount offered by a seller?

• To delay the payment for the merchandise sold

• To increase the cost of the merchandise sold

• To encourage the buyer to pay before the end of the credit period

• To reduce the cost of the merchandise sold

What is the dual nature of merchandise transactions?

• Each merchandising transaction affects a buyer and a seller

• Each merchandising transaction affects a seller and a manufacturer

• Each merchandising transaction affects a seller only

• Each merchandising transaction affects a buyer only

What are the four closing entries for a merchandising business?

• Credit each temporary account with a debit balance, debit Income Summary, Debit Income Summary, credit the drawing account

• Debit each temporary account with a credit balance, credit Income Summary, Debit Income Summary, credit the drawing account

• Credit each temporary account with a debit balance, debit Income Summary, Debit Income Summary, credit the owner’s capital account

• Debit each temporary account with a credit balance, credit Income Summary, Debit Income Summary, credit the owner’s capital account