True/False
Indicate whether the
statement is true or false.
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1.
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Purchases and sales of merchandise are the two major activities of a
merchandising business.
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2.
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Very few states in the United States require collecting a tax on sales of
merchandise to customers.
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3.
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Sales tax rates are usually stated as a percentage of sales.
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4.
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The same accounting procedures are used for all sales tax rates.
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5.
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Every business collecting a sales tax needs accurate records of the amount of
total sales and total sales tax collected.
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6.
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Businesses must file reports with the proper government unit and pay the amount
of sales tax collected.
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7.
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The amount of sales tax collected is an asset of the business until paid to the
state government.
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8.
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The amount of sales tax collected is recorded in a separate liability account
titled Sales Tax Payable.
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9.
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The account Sales Tax Payable is increased by a debit and decreased by a
credit.
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10.
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A sale of merchandise may be for cash or on account.
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11.
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A sale of merchandise increases the revenue of a business.
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12.
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The increase in revenue from a sale should be recorded at the time actual
payment is received.
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13.
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A customer who uses a credit card promises to pay the bank that issued the
credit card at a later date.
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14.
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The bank that issues the credit card bills the customer and collects the amount
owed.
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15.
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Sales for cash and credit cards are recorded as a single cash sales
transaction.
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16.
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An invoice used as a source document for recording a sale on account is a
purchase invoice.
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17.
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The sales invoice from a seller is considered by the buyer to be a purchase
invoice.
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18.
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Equality of debits and credits in a special journal is proved at the end of each
month.
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19.
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Double lines are ruled to show that totals have been verified as correct.
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20.
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A person or business to whom merchandise or services are sold is a
customer.
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21.
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Sales tax is a tax on sale of merchandise or services.
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22.
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The Realization of Revenue accounting concept is applied when a sale is recorded
at the time the sale is made.
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23.
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A credit card sale is a sale in which cash is received for the total amount of
the sale at the time of the transaction.
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24.
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A cash sale is a sale in which a credit card is used for the total amount of the
sale at the time of the transaction.
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25.
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At the end of the week, all credit card slips are gathered together, sorted by
issuing bank, and mailed individually to each of the banks to collect payment.
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26.
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A computer used to collect, store, and report all the information of a sales
transaction is called a point-of-sale terminal.
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27.
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The source document for a cash sale is a cash register tape.
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28.
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For weekly cash and credit card sales, the asset account Cash is debited for the
total of sales and sales tax, but the revenue account Sales is credited only for the total of
sales.
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29.
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The revenue account Sales has a normal credit balance.
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30.
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The liability account Sales Tax Payable has a normal debit balance.
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31.
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A sales invoice is also referred to as a sales ticket or a sales slip.
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32.
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Charge customer accounts are summarized in a general ledger account titled
Accounts Receivable.
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33.
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Accounts Receivable is an asset account with a normal debit balance.
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34.
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The source document for receiving cash on account is a receipt.
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35.
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When cash is received on account, Cash is increased and Accounts Receivable is
increased.
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36.
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The report that summarizes the cash and credit card sales of a point-of-sale
terminal is called a batch report.
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37.
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A sales journal is used to record both cash sales and sales on account.
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38.
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A special journal used to record only cash receipts transactions is a cash
receipts journal.
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39.
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The sales discount is calculated by multiplying the sales invoice amount by the
sales discount rate.
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40.
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Credit allowed a customer for the sales price of returned merchandise is called
a sales discount.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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41.
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The amount of sales tax a business collects is ____.
a. | an asset | c. | a liability | b. | an expense. | d. | revenue |
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42.
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The amount of sales tax collected is recorded in a ____.
a. | combined revenue account | c. | separate liability
account | b. | separate ledger | d. | separate revenue account |
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43.
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The amount of sales tax on a sale is calculated as price of goods ____.
a. | plus the sales tax rate | c. | minus the sales tax
rate | b. | times the sales tax rate | d. | divided by the sales tax rate |
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44.
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If a customer buys $300.00 worth of merchandise and the sales tax is 8%, the
total bill the customer must pay is ____.
a. | $300.00 | c. | $324.00 | b. | $304.00 | d. | $342.00 |
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45.
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An increase in revenue resulting from a sale on account should be recorded
____.
a. | at the time of the sale | c. | at the end of the fiscal
period | b. | at the end of each month | d. | when the final payment is made |
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46.
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Recording revenue from transactions at the time goods or services are sold is an
application of the accounting concept ____.
a. | Matching Expenses with Revenue | c. | Realization of
Revenue | b. | Objective Evidence | d. | Business Entity |
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47.
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A sale in which cash is received for the total amount of the sale at the time of
the transaction is a ____.
a. | credit card sale | c. | convenience sale | b. | cash sale | d. | deferred-payment
sale |
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48.
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Using a cash register tape as a source document for weekly cash and credit card
sales is an application of the accounting concept ____.
a. | Matching Expenses with Revenue | c. | Realization of
Revenue | b. | Objective Evidence | d. | Business Entity |
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49.
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The journal entry for a cash and credit card sales transaction is ____.
a. | debit Cash; credit Sales; credit Sales Tax Payable | b. | debit Cash; debit
Sales Tax Payable; credit Sales | c. | debit Sales; credit Cash; credit Sales Tax
Payable | d. | debit Sales Tax Payable; debit Cash; credit Sales |
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50.
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In a cash sales transaction with sales tax, the ____.
a. | sales tax amount collected is an asset | b. | sales tax amount collected is a
liability | c. | balance of the sales account is decreased | d. | balance of the cash
account is decreased |
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51.
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The total amount due from all charge customers is summarized in a general ledger
account titled ____.
a. | Accounts Receivable | c. | Revenue | b. | Accounts Payable | d. | Sales |
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52.
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Sales invoices should be ____.
a. | numbered in sequence | b. | prepared in triplicate | c. | used as source
documents for sales on account | d. | all of these |
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53.
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A sale on account transaction ____.
a. | increases the balance of the Accounts Payable account | b. | increases the amount
to be collected later from a customer | c. | decreases the amount to be collected later from
a customer | d. | decreases the balance of the Accounts Receivable
account |
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54.
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When merchandise is sold on account and sales tax is also collected,
____.
a. | Accounts Receivable is credited for the total sale and sales tax | b. | the accounts
receivable account balance is increased | c. | Sales is debited for the price of the
goods | d. | the sales tax is not reported |
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55.
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When cash is received on account, the balance of the ____.
a. | cash account decreases | b. | sales account increases | c. | sales tax payable
account decreases | d. | accounts receivable account
decreases |
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56.
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The journal entry for a cash receipt on account is ____.
a. | debit Cash; credit Accounts Receivable | b. | debit Cash; credit Accounts
Payable | c. | debit Accounts Payable; credit Cash | d. | debit Accounts Payable; credit Accounts
Receivable |
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57.
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A special journal used to record only sales on account is ____.
a. | a cash journal | c. | a cash receipts journal | b. | a purchases
journal | d. | none of the
above |
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58.
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Using a sales invoice as a source document for recording a sale on account is an
application of the accounting concept ____.
a. | Matching Expenses with Revenue | c. | Realization of
Revenue | b. | Objective Evidence | d. | Business Entity |
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59.
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A special journal used to record only cash receipt transactions is ____.
a. | a cash journal | c. | a cash receipts journal | b. | a purchases
journal | d. | none of the
above |
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60.
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A form prepared by the vendor showing the amount deducted for returns and
allowances is called a ____.
a. | credit memorandum | c. | purchase invoice | b. | sales invoice | d. | cash receipt |
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