True/False
Indicate whether the sentence or 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 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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Businesses need only keep records of sales tax collected; they do not have to have
records of sales.
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8.
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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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9.
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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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10.
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The
account Sales Tax Payable is increased by a debit and decreased by a credit.
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11.
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A
sale of merchandise may be for cash or a promise to pay at a later date.
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12.
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A
sale of merchandise increases the revenue of a business.
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13.
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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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14.
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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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15.
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The
bank that issues the credit card bills the customer and collects the amount owed.
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16.
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Sales
for cash and credit cards are recorded as a single cash sales transaction.
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17.
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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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18.
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The
sales invoice from a seller is considered by the buyer to be a purchase invoice.
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19.
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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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20.
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Double lines are ruled to show that totals have been verified as
correct.
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21.
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A
person or business to whom merchandise or services are sold is a customer.
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22.
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Sales
tax is a tax on sale of merchandise or services.
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23.
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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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24.
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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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25.
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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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26.
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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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27.
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When
cash and credit card sales are recorded at the end of each week, if a month ends in the middle of a
week, the whole week is recorded in the following month.
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28.
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The
source document for a cash sale is a cash register tape.
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29.
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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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30.
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The
revenue account Sales has a normal credit balance.
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31.
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The
liability account Sales Tax Payable has a normal debit balance.
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32.
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A
sales invoice is also referred to as a sales ticket or a sales slip.
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33.
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Charge customer accounts are summarized in a general ledger account titled Accounts
Receivable.
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34.
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Accounts Receivable is an asset account with a normal debit balance.
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35.
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The
source document for receiving cash on account is a receipt.
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36.
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When
cash is received on account, Cash is increased and Accounts Receivable is increased.
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37.
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When
cash is proved, it must always equal the amount on the next unused check stub.
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38.
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A
sales journal is used to record both cash sales and sales on account.
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39.
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A
special journal used to record only cash receipts transactions is a cash receipts
journal.
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40.
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A
check mark in the Post. Ref. column means that amounts on that line need to be posted
individually.
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Multiple Choice
Identify the
letter of 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 | c. | balance of the
sales account is decreased | b. | sales tax amount collected is a
liability | d. | balance of the
cash account is decreased | | | | |
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51.
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A
sale for which cash will be received at a later date is a ____. a. | cash
sale | c. | delayed-payment
sale | b. | credit card
sale | d. | sale on
account | | | | |
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52.
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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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53.
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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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54.
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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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55.
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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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56.
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When
cash is received on account, the balance of the ____. a. | cash account
decreases | c. | sales tax
payable account decreases | b. | sales account increases | d. | accounts receivable account decreases | | | | |
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57.
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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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58.
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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 | |
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