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Chapter 19 Study Guide


True/False
Indicate whether the sentence or statement is true or false.
 

 1. 
Using special journals improves the efficiency of recording transactions.
 

 2. 
All sales are recorded in a sales journal.
 

 3. 
Sales tax rates vary from state to state.
 

 4. 
When journalizing sales on account in a sales journal, the sale amount plus the sales tax is written in the Accounts Receivable Credit column.
 

 5. 
Each amount in a sales journal's Accounts Receivable Debit column is posted to an accounts receivable ledger account.
 

 6. 
Equality of debits and credits is proved for a sales journal after each journal entry.
 

 7. 
Individual items in the sales journal are posted frequently to the customer accounts in the accounts receivable ledger.
 

 8. 
When a sales discount is taken, the customer pays more cash than is recorded on the invoice amount.
 

 9. 
When credit terms of 2/10, n/30 are offered, it means a cash discount of 2 percent is offered if the invoice is paid within 30 days.
 

 10. 
Even though a company offers a sales discount, the customer is invoiced for the full sales amount plus sales tax on that amount.
 

 11. 
When cash is received for a sale on account within the discount period, the amount credited to Accounts Receivable is reduced by the amount of discount.
 

 12. 
Each entry in the Accounts Receivable Credit column of the cash receipts journal affects the account of the customer named in the Account Title column.
 

 13. 
The contra sales account, Sales Returns and Allowances, has a normal credit balance.
 

 14. 
When a customer is granted credit for merchandise returned, Accounts Receivable is debited.
 

 15. 
Correcting entries always affect at least one general ledger account.
 

 16. 
A schedule of accounts receivable is prepared before financial statements are prepared to prove the accounts receivable ledger.
 

 17. 
Goods or services shipped out of a seller's home country to a foreign country are exports.
 

 18. 
A letter issued by a bank guaranteeing that a named individual or business will be paid a specified amount provided stated conditions are met is a letter of credit.
 

 19. 
A bill of lading serves as a customer invoice for merchandise sold.
 

 20. 
A form signed by a buyer at the time of a sale of merchandise in which the buyer promises to pay the seller a specified sum of money usually at a stated time in the future is a trade acceptance.
 

 21. 
International sales are not a very important source of revenue for businesses throughout the world.
 

 22. 
All sales of merchandise on account are recorded in a sales journal.
 

 23. 
Regardless of when merchandise is sold, revenue should be recorded when cash is received.
 

 24. 
In some states, certain customers do not have to pay sales tax.
 

 25. 
A sales invoice is the source document for journalizing a sales on account transaction.
 

 26. 
When state regulations require that sales tax be paid only on actual sales realized, the reduction in sales tax is calculated by multiplying the original sales invoice amount by the sales discount rate.
 

 27. 
Because Sales Discount is a contra account to Sales, it has a normal credit balance.
 

 28. 
Sales discounts are recorded as a debit to Sales.
 

 29. 
Sales returns and allowances always reduce revenue.
 

 30. 
The best order to post special journals is (1) sales, (2) purchases, (3) general, (4) cash receipts, and (5) cash payments.
 

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 31. 
A special journal used to record only sales of merchandise on account transactions is ____.
a.
a sales journal
c.
a general journal
b.
a cash receipts journal
d.
none of the above
 

 32. 
Using a copy of the sales invoice as the source document for recording a sale on account transaction is an application of the accounting concept ____.
a.
Matching Expenses with Revenue
c.
Objective Evidence
b.
Historical Cost
d.
Realization of Revenue
 

 33. 
The entry to journalize a sale of merchandise on account, plus sales tax, is a debit to Accounts Receivable and a credit to ____.
a.
Sales and Sales Tax Payable
c.
Sales Discount and Sales Tax Payable
b.
Sales and Sales Discount
d.
Sales
 

 34. 
For a sale on account of $1,000.00 with sales tax of $80.00, the amount recorded in the Accounts Receivable amount column of a sales journal is ____.
a.
$1,080.00
c.
$920.00
b.
$1,000.00
d.
$80.00
 

 35. 
Each amount in a sales journal's Accounts Receivable Debit column is posted as a ____.
a.
credit to Accounts Receivable in the general ledger
b.
debit to Accounts Receivable in the general ledger
c.
credit to the customer account in the accounts receivable ledger
d.
debit to the customer account in the accounts receivable ledger
 

 36. 
Equality of debits and credits is proved for a cash receipts journal at the end of each ____.
a.
day
c.
fiscal year
b.
month
d.
none of the above
 

 37. 
A special journal in which only receipts of cash are recorded is ____.
a.
a cash payments journal
c.
a sales journal
b.
a cash receipts journal
d.
none of the above
 

 38. 
The entry to journalize a cash receipt from a sale transaction, plus sales tax, is a debit to Cash and a credit to ____.
a.
Sales and Sales Tax Payable
c.
Sales Discount and Sales Tax Payable
b.
Sales and Sales Discount
d.
Sales
 

 39. 
Sales discounts are recorded in ____.
a.
an accounts receivable ledger account
c.
a general ledger account
b.
an accounts payable ledger account
d.
a sales account
 

 40. 
Sales discounts ____.
a.
affect only cash sales
c.
do not affect sales
b.
decrease sales
d.
increase sales
 

 41. 
Credit terms of 2/10, n/30 mean that if the account is paid in ____.
a.
2 days, a 10 percent discount will be allowed
b.
10 days, a 2 percent discount will be allowed
c.
10 days, a 30 percent discount will be allowed
d.
30 days, a 2 percent discount will be allowed
 

 42. 
The amount of cash received for a sale on account of $1,000.00 with sales tax of $80.00 when the cash is received within the 2 percent discount period is ____.
a.
$1,080.00
c.
$1,058.40
b.
$1,062.00
d.
$1,053.60
 

 43. 
Each amount listed in the Accounts Receivable Credit column of a cash receipts journal is posted individually to the proper customer account in ____.
a.
the accounts payable ledger
c.
the general ledger
b.
the accounts receivable ledger
d.
none of the above
 

 44. 
Credit allowed a customer for part of the sales price of merchandise not returned is a ____.
a.
credit memorandum
c.
sales allowance
b.
debit memorandum
d.
sales return
 

 45. 
Sales returns and allowances ____.
a.
affect only sales on account
c.
decrease sales
b.
increase sales
d.
have no affect on sales
 

 46. 
Sales Returns and Allowances is ____.
a.
an expense account
c.
a contra expense account
b.
a revenue account
d.
a contra revenue account
 

 47. 
A sale on account recorded to the wrong customer account in the sales journal requires an entry to correct ____.
a.
the sales account in the general ledger
b.
the accounts receivable account in the general ledger