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Determine each statement if it is True or False. 1. A sale is a transfer of merchandise from one business or individual to another in exchange for cash or a promise to pay cash. 2. When the account is not paid within the credit period, the account is classified as past due. 3. The BIR allows only the direct write off method of recognizing bad debts expense 4. A purchase order is a written order to buy goods, specified therein the name or brand of product/s, specifications and quantity. 5. Sales discount is a contra account used to record cash discounts granted on purchases. 6. The computations of purchases discounts is just the same with the computation on sales discounts. 7. Sales to individuals or entities on credit is called credit sales. 8. A merchandising business activity purchases merchandise from other entity such as food, clothing, or computers, and sells that merchandise to customers for profit. 9. When cash is immediately received as full payment for merchandise sold, we call it cash sales. 10. When a customer failed to pay within the credit period, the customer may issue formal written promise to pay with specified sum of money at definite future date/s, we call it, Note Payable. 11. Sales returns and allowances is a contra account of purchases. 12. When sales returns or allowances is granted to open customers, a credit memo is issued for the amount involved. 13. To generate sales volume and to encourage prompt payment by customers, discounts are offered. 14. Cash discount is deducted from the list price and only the difference will be the basis for invoicing and recording. 15. Trade discount is deducted from the list price and only the difference called the invoice price (or gross sales price) will be the basis for invoicing and recording. 16. Freight-In is an adjunct-account used to record transportation charges merchandise purchases. 17. FOB shipping point means Free on Board shipping point, the buyer bears the transportation cost. 18. Merchandise inventory refers to merchandise purchased for resale.

Question

Determine each statement if it is True or False.

  1. A sale is a transfer of merchandise from one business or individual to another in exchange for cash or a promise to pay cash.
  2. When the account is not paid within the credit period, the account is classified as past due.
  3. The BIR allows only the direct write off method of recognizing bad debts expense
  4. A purchase order is a written order to buy goods, specified therein the name or brand of product/s, specifications and quantity.
  5. Sales discount is a contra account used to record cash discounts granted on purchases.
  6. The computations of purchases discounts is just the same with the computation on sales discounts.
  7. Sales to individuals or entities on credit is called credit sales.
  8. A merchandising business activity purchases merchandise from other entity such as food, clothing, or computers, and sells that merchandise to customers for profit.
  9. When cash is immediately received as full payment for merchandise sold, we call it cash sales.
  10. When a customer failed to pay within the credit period, the customer may issue formal written promise to pay with specified sum of money at definite future date/s, we call it, Note Payable.
  11. Sales returns and allowances is a contra account of purchases.
  12. When sales returns or allowances is granted to open customers, a credit memo is issued for the amount involved.
  13. To generate sales volume and to encourage prompt payment by customers, discounts are offered.
  14. Cash discount is deducted from the list price and only the difference will be the basis for invoicing and recording.
  15. Trade discount is deducted from the list price and only the difference called the invoice price (or gross sales price) will be the basis for invoicing and recording.
  16. Freight-In is an adjunct-account used to record transportation charges merchandise purchases.
  17. FOB shipping point means Free on Board shipping point, the buyer bears the transportation cost.
  18. Merchandise inventory refers to merchandise purchased for resale.
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Solution

  1. True - A sale is indeed a transfer of merchandise from one business or individual to another in exchange for cash or a promise to pay cash.
  2. True - If an account is not paid within the credit period, it is classified as past due.
  3. False - The BIR (Bureau of Internal Revenue) allows both the direct write off method and the allowance method for recognizing bad debts expense.
  4. True - A purchase order is a written order to buy goods, specifying the name or brand of product/s, specifications, and quantity.
  5. False - Sales discount is a contra account used to record cash discounts granted on sales, not purchases.
  6. True - The computation of purchase discounts is the same as the computation of sales discounts.
  7. True - Sales to individuals or entities on credit are indeed called credit sales.
  8. True - A merchandising business activity does purchase merchandise from other entities and sells that merchandise to customers for profit.
  9. True - When cash is immediately received as full payment for merchandise sold, it is called cash sales.
  10. False - When a customer fails to pay within the credit period, the customer may issue a formal written promise to pay, but this is called a Note Receivable, not a Note Payable.
  11. False - Sales returns and allowances is a contra account of sales, not purchases.
  12. True - When sales returns or allowances are granted to customers, a credit memo is issued for the amount involved.
  13. True - Discounts are indeed offered to generate sales volume and to encourage prompt payment by customers.
  14. False - Cash discount is not deducted from the list price. It is deducted from the amount due if payment is made within a specified period.
  15. True - Trade discount is deducted from the list price and the difference, called the invoice price (or gross sales price), is the basis for invoicing and recording.
  16. True - Freight-In is an account used to record transportation charges on merchandise purchases.
  17. True - FOB shipping point does mean that the buyer bears the transportation cost.
  18. True - Merchandise inventory does refer to merchandise purchased for resale.

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Similar Questions

Determine which letter is the correct answer. 1. It is a transfer of merchandise from one business or individual to another in exchange for cash or a promise to pay. a. purchases b. sale c. order d. discount 2. When cash is immediately received as full payment for merchandise sold, it is called a what? a. cash discount b. cash discounted c. cash sales d. cash debit 3. A document issued by the seller when collection is made. a. collection receipt b. sales invoice c. purchase order d. check 4. Price reductions granted to customers because of defects or other problems with the unreturned merchandise are called what? a. accounts receivable b. sales returns c. sales allowances d. sales discounts 5. Sales returns and allowances is a contra account of a. sales b. purchases c. allowances d. returns 6. The term when total amount due shall be paid within 30 days from the date of purchased. b. 3/com c. n/30 d. 3/10, 2/15, n/30 a. 3/10, n/30 7. It means 20% trade discount. 3% cash discount if the account is paid within 10 days, net amount due shall be paid within 30 days. a. 3/10, 2/15, n/30 b. n/307 c. 3/10, n/30 d. 20, 3/10, n/30 8. It means 20% and 25% trade discount, 3% cash discount if the account is paid within 10 days, net amount due shall be paid within 30 days. a. 3/10, 2/15, n/30 b. n/30 c. 3/10, n/30 d. 20 and 25, 3/10, n/30 9. A term that the buyer bears the transportation cost. a. Freight-In b. Freight-Out c. discounts d. FOB shipping point 10 A term that the seller bears the transportation cost. a. FOB destination b. Freight collect c. Freight prepaid d. Freight-out 11. A term that the shipping or forwarding company is going to collect the transportation cost to the buyer, though the seller bears the transportation cost. a. FOB shipping point freight collect b. FOB shipping point freight prepaid c. FOB destination freight collect d. FOB destination freight prepaid

LO 6.4 Which of the following accounts are used when recording the sales entry of a sale on credit?Choose one answer from the options below.A. merchandise inventory, cashB. accounts receivable, merchandise inventoryC. accounts receivable, salesD. sales, cost of goods sold

Which is not reflected in the accounting books.*a. Trade discountb. Sales returnc. Sales discountd. Purchase discount

Sales is a(n) (expense/revenue/asset) account and is reported on the (income/balance) (statement/sheet).

Accounting – Unit 3: AccountsAccounting | Page 45. A business can earn revenue by making cash and credit sales, differentiate betweena cash sale and a credit sale.Cash saleCredit sale6. State the formula to calculate profit and/or loss.7. A business made a sale for $100 and the cost of goods was $60. Calculate the grossprofit for the business and using the definition of an expense, explain why the cost ofgoods sold will be treated as an expense.Answer:

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