Trading Firms and Credit Transactions Quiz

What is a credit transaction?

• A transaction where payment is made immediately

• A transaction where payment is deferred to a later date

• A transaction involving only cash

• A transaction involving only services

Which source document is used to verify a credit transaction?

• Bank Statement

• Receipt

• Invoice

• Cheque

What do credit terms on an invoice specify?

• The warranty period

• The payment due date and discount terms

• The delivery date

• The quality of goods

How can a business distinguish between a sales invoice and a purchase invoice?

• By the total amount on the invoice

• By the position of the business name on the invoice

• By the date of the invoice

• By the color of the invoice

What is the importance of source documents in the Accounting process?

• They increase the number of transactions

• They ensure information is verifiable and provides a faithful representation

• They reduce the need for audits

• They provide entertainment

What does the term '5/7, n/60' mean in credit terms?

• 5% discount if paid in 5 days, net amount due in 7 days

• 5% discount if paid in 7 days, net amount due in 30 days

• 5% discount if paid in 60 days, net amount due in 7 days

• 5% discount if paid in 7 days, net amount due in 60 days

What is the main item purchased on credit by a trading business?

• Furniture

• Inventory

• Vehicles

• Office supplies

What is the purpose of a Purchases Journal?

• To record sales transactions

• To track employee attendance

• To summarize all purchases of inventory on credit

• To record all cash transactions

What does the Inventory column in the Purchases Journal record?

• The total amount owed including GST

• The cost price of inventory excluding GST

• The selling price of inventory

• The discount received on inventory

What is the effect of total credit purchases on the Accounting equation?

• Increase in assets and liabilities

• Decrease in assets and liabilities

• Increase in owner's equity

• No effect on assets and liabilities