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Accounting IA Ch.6-8 Test

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1.
How is operating income (income from operations) calculated?
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2.
What does 2/10, n30 mean? How is it read?
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3.
What account is affected for purchase discounts in a perpetual system? How is is affected?
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4.
How are the cost of merchandise sold and inventory determined in a periodic system?
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5.
What is a debit memo (debit memorandum)?
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6.
How are the cost of merchandise sold and inventory determined in a perpetual system?
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7.
What is a report form?
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8.
How is gross profit calculated?
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9.
What are administrative expenses (general expenses)? Give a few examples.
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10.
How do you calculate net income?
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11.
What is a credit memo (credit memorandum)?
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12.
What is a trade discount?
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13.
What are selling expenses? Give a few examples.
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14.
Why are perpetual systems so widely used?
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15.
How do you calculate Net Sales?
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16.
What is an account form?
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17.
What kind of accounts are Sales R&A and Sales Discounts? How are the accounted for on the income statement?
A.
They are contra asset accounts. They are subtracted from sales to get net sales.
B.
Sales-Cost of Merchandise Sold = Gross Profit - Operating Expenses = Net Income/Loss
C.
Expenses incurred in management of the business. EG office salaries, office supplies, depreciation of office equipment
D.
Many businesses use computerized systems.
E.
A balance sheet with assets on the left and liabilities and owner's equity on the right.
F.
An authorization for the seller to decrease their A/R account for the buyer. "Hey, Joe Blow owes us less money!"
G.
A balance sheet in a three part downward form.
H.
Expenses incurred in the direct selling of merchandise. EG advertising expenses, store salaries, delivery fees, depreciation of store equipment and buildings, rent expenses.
I.
Credit terms. 2% discount if paid in full in 10 days, must be paid in full in 30 days. Read as "Two ten net thirty".
J.
Sales-Cost of Merchandise Sold = Gross Profit
K.
Informs the seller of the amount the buyer debited their A/P account to the seller for purchase returns. "Hey, we owe you less money!"
L.
Operating income=Net Income Therefore, gross profit minus operating expenses equals operating income or net income/loss.
M.
By physically counting the inventory at the end of the period.
N.
Merchandise Inventory is credited.
O.
Sales-Sales Returns and Allowances-Sales Discounts = Net Sales
P.
Discount for buying in large quantity.
Q.
Each purchase and sale is recorded in the Merchandise Inventory and Cost of Merchandise Sold accounts.

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