ACCT 2401 Test 2 Study Guide Chapters 4 & 5 | Accounting Review, Key Concepts & Practice
Questions
What is the calculation for a multi-step income statement for merchandising company? - ANS
✔✔Sales
-Sales Returns and Allowances
-Sales Discount
=Net Sales
-Cost of Goods Sold
=Gross Profit
-Operating Expenses
=Net Income
What is Sales Discount? - ANS ✔✔Discount granted on sales for the customer's early payment
within a discount period
What is Sales Returns and Allowances? - ANS ✔✔A reduction in the amount of sales due to
customers returning merchandise or accepting unsatisfactory goods
What accounts are Sales Discount & Sales Returns and Allowances? What normal balances do
they have? - ANS ✔✔They are contra revenues and they have a normal debit balance
What are the two ways to track inventory? - ANS ✔✔Perpetual and Periodic
What is the perpetual inventory system? - ANS ✔✔An inventory system in which the business
keeps a continuous record of inventory and the cost of goods sold
, What is the periodic inventory system? - ANS ✔✔An inventory system in which the business
DOES NOT keep a continuous record of inventory.
Which method(s) of inventory keeps a physical count of inventory? - ANS ✔✔Both perpetual
and periodic
What is FOB shipping point? - ANS ✔✔When the buyer pays for shipping
What is FOB destination? - ANS ✔✔When the seller pays shipping
What are credit terms? - ANS ✔✔An agreement between the buyer and seller telling how the
buyer is going to pay for merchandise
What do the credit terms 2/10, n/30 mean? - ANS ✔✔The buyer can get a 2% discount on their
merchandise if the pay in 10 days. It not, they have 30 days to pay in full
What account is Inventory? What is the normal balance? - ANS ✔✔Asset and normal debit
balance
What account is Sales? What is the normal balance? - ANS ✔✔Revenue and normal credit
balance
What account is Cost of Goods Sold? What is the normal balance? - ANS ✔✔Expense and
normal debit balance
What is the journal entry for buyer purchasing merchandise? - ANS ✔✔Debit: Inventory Credit:
Cash (or Accounts Payable)
Questions
What is the calculation for a multi-step income statement for merchandising company? - ANS
✔✔Sales
-Sales Returns and Allowances
-Sales Discount
=Net Sales
-Cost of Goods Sold
=Gross Profit
-Operating Expenses
=Net Income
What is Sales Discount? - ANS ✔✔Discount granted on sales for the customer's early payment
within a discount period
What is Sales Returns and Allowances? - ANS ✔✔A reduction in the amount of sales due to
customers returning merchandise or accepting unsatisfactory goods
What accounts are Sales Discount & Sales Returns and Allowances? What normal balances do
they have? - ANS ✔✔They are contra revenues and they have a normal debit balance
What are the two ways to track inventory? - ANS ✔✔Perpetual and Periodic
What is the perpetual inventory system? - ANS ✔✔An inventory system in which the business
keeps a continuous record of inventory and the cost of goods sold
, What is the periodic inventory system? - ANS ✔✔An inventory system in which the business
DOES NOT keep a continuous record of inventory.
Which method(s) of inventory keeps a physical count of inventory? - ANS ✔✔Both perpetual
and periodic
What is FOB shipping point? - ANS ✔✔When the buyer pays for shipping
What is FOB destination? - ANS ✔✔When the seller pays shipping
What are credit terms? - ANS ✔✔An agreement between the buyer and seller telling how the
buyer is going to pay for merchandise
What do the credit terms 2/10, n/30 mean? - ANS ✔✔The buyer can get a 2% discount on their
merchandise if the pay in 10 days. It not, they have 30 days to pay in full
What account is Inventory? What is the normal balance? - ANS ✔✔Asset and normal debit
balance
What account is Sales? What is the normal balance? - ANS ✔✔Revenue and normal credit
balance
What account is Cost of Goods Sold? What is the normal balance? - ANS ✔✔Expense and
normal debit balance
What is the journal entry for buyer purchasing merchandise? - ANS ✔✔Debit: Inventory Credit:
Cash (or Accounts Payable)
