In a periodic inventory system, when is the determination of Cost of Goods Sold (COGS) typically made?

At the end of the accounting period

Continuously throughout the accounting period

At the beginning of the accounting period

What is the purpose of adjusting entries in a periodic inventory system?

To reflect the actual Cost of Goods Sold and adjust inventory at the end of the period

To record daily sales transactions

To determine the beginning inventory

Which of the following is an advantage of the periodic inventory system?

Simplicity in managing inventory and cost effective

Real-time information on inventory levels

Complex record-keeping requirements

What is a disadvantage of the periodic inventory system regarding information availability?

Lacks real-time information on inventory levels and COGS

Provides real-time information on inventory levels

Requires continuous record-keeping

What risk is associated with the periodic inventory system in terms of accuracy?

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?

Both systems have the same implications

No implications on income tax reporting

How does the perpetual system handle the recording of purchases?

The cost of goods is immediately recorded in the Inventory account

Purchases are recorded at the end of the accounting period

Purchases are recorded in a temporary Purchases account

Which inventory valuation methods can be used with the perpetual system?

Average Cost and Specific Identification

How do financial statements reflect inventory information in the perpetual system?

They reflect real-time information about inventory costs and values

They provide real-time information only on sales revenue

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 enables easy calculation and analysis of inventory turnover ratios

It doesn't allow for inventory turnover analysis

It provides static data for analysis

It requires extensive physical inventory counts for analysis

How does the perpetual system contribute to loss prevention?

By minimizing the risk of losses through proactive addressing of discrepancies

By ignoring discrepancies and potential issues

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 inventory tracking systems

Integration with social media platforms

Integration with transportation management systems

Integration with employee scheduling software

How does the perpetual system enhance auditing and accuracy?

By enhancing the accuracy of financial records and reducing the need for extensive physical inventory counts

By increasing the need for extensive physical inventory counts

By reducing the accuracy of financial records

By excluding the need for auditing entirely

Which of the following best describes a trade discount?

A reduction from the list price to encourage customer to buy more quantities

A deduction granted to encourage prompt payment of accounts

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?

Directly shown as the discounted price in the book of accounts

Recorded as a purchase discount in the buyer's book

Recorded as a sales discount in the seller's book

Excluded from the accounting records entirely

How is a cash discount recorded in the buyer's book?

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 prompt payment of accounts

To reduce the list price for bulk purchases

Which account is used by the buyer to record the cost of goods or merchandise brought?

Purchases Return and Allowances

What account is utilized to record returns and allowances granted by the seller to the buyer?

Purchases Return and Allowances

What does the Purchase Discounts account represent from the buyer's perspective?

Reduction from the purchase price granted to the buyer after paying within the discount period

Reduction from the purchase price granted to the seller

Additional cost incurred during transportation

Cost of goods or merchandise brought

What does the Freight-in account represent for the buyer?

Additional cost incurred during transportation

Reduction from the purchase price granted to the seller

Reduction from the purchase price granted to the buyer after paying within the discount period

Cost of goods or merchandise brought

What does the Sales Discounts account represent from the seller's perspective?

Reduction from the sales price granted to the buyer after paying within the discount period

Additional revenue earned from sales

Additional cost incurred during transportation

What does the Freight-out account represent for the seller?

Additional cost incurred during transportation

Additional revenue earned from sales

Reduction from the sales price granted to the buyer after paying within the discount period

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 end of the accounting period

At the beginning of the accounting period

Throughout the accounting period

Only when requested by external auditors

What is the purpose of closing entries?

To transfer balances from temporary accounts to permanent accounts

To open new accounts for the next accounting period

To transfer balances from permanent accounts to temporary accounts

What is the purpose of the Income Summary account in closing entries?

To serve as a temporary account used to make closing entries

To record all income and expenses throughout the accounting period

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 ensure that all temporary accounts have been closed properly

To verify that all permanent accounts have been closed

To check if the company has enough cash reserves

To calculate the total revenue for the period

FABM2 Reviewer/mock test

Quiz

•

Financial Education

•

11th Grade

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Practice Problem

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Medium

Janison Zamora

Used 5+ times

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Revenue account

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They sell products to end users

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