ACCOUNTING I Chapter 10 Reading Guide. 1. What are the two major activities of merchandising businesses?

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1 Due: Name: Hour: ACCOUNTING I Chapter 10 Reading Guide Answer the following questions as you read Chapter 10, pages JOURNALIZING SALES ON ACCOUNT; USING A SALES JOURNAL 1. What are the two major activities of merchandising businesses? 2. What is a customer? 3. Who determines if a sales tax is charged and how much? How are sales tax usually stated? 4. Why must a business keep an accurate record of the sales taxes collected? What two amounts must sales tax records show? 5. How is the Sales Tax Payable account classified? Why is this account considered that classification? Which side is its normal balance side on? 6. What is the Realization of Revenue concept? 7. What is a sale on account? What is it also referred to as? Filename: Reading Guide Ch. 10 9ed.doc

2 8. What account summarizes the total due from all charge customers? How is it classified? Which side does the account increase on? 9. What journal is used to record Sales on Account? What are the special amount columns in this journal (include debit/credit parts)? 10. How many lines does it take to journalize a transaction in a Sales Journal? 11. What is a sales invoice? 12. What is a sales invoice also referred to as? Why are they usually prepared duplicate or triplicate? 13. What accounting concept is being applied when a Sales Invoice is prepared and used to journalize entries? 14. Why is the customer s name written in the Account Debited column of a sales journal? (see steps on page 273) 2

3 15. When is a sales journal totaled? How do you prove that the totals in the sales journal are correct? 10-2 JOURNALIZING CASH RECEIPTS; USING A CASH RECEIPTS JOURNAL 16. What is the difference between a cash sale and a credit card sale? 17. What does POS in POS terminal stand for. 18. What does a sales clerk scan to enter a sale into a POS terminal? 19. What is a terminal summary? 20. What three decisions can a POS system help a manager make? 21. What is a batch report? 3

4 22. When does a business record a credit card sale? How long does it take the business to receive the money from the credit card company? How does the money get from the credit card company to the business? 23. Who does the customer pay when he/she uses a credit card? 24. What is a cash receipts journal used for? 25. What is the main difference between the cash receipts journal in this chapter and a cash payments journal in Chapter 9 (concerning the cash accounts and how they are affected)? 26. What is a sales discount? 27. What are the special amount columns on a cash receipts journal (include debit/credit)? 28. What are most cash receipts for? (list two types of transactions) 4

5 29. What is the source document for cash sale? 30. How often do most businesses batch out to determine their amount of cash and credit card sales? 31. Why is a check mark placed in the Account Title for a cash sale? Why is a check mark placed in the Posting Ref. columns of a cash receipts journal for a cash sale? (see steps on page 279) 32. What type of source document is prepared when cash is received on account? Why are these forms prepared in duplicate? 33. Which accounting concept is being applied when a receipt is used as the source document for received cash on account transaction? 34. A customer owes $2,400 for an invoice. You offer the customer 2/10, n/30 as terms. The customer pays the invoice within the discount period. How much will the customer pay you (show your work)? 35. What accounts are affected and how (debit or credit) when a customer pays an invoice within the discount time frame? 5

6 36. When is a cash receipts journal totaled? How do you prove that the totals are correct? 37. What is the formula for proving cash (cash balance on hand at the end of the month)? What is the cash balance on hand at end of the month compared to? 10-3 RECORDING TRANSACTIONS USING A GENERAL JOURNAL 38. What is the different between a sales return and a sales allowance? 39. What is a credit memorandum? 40. Who is given the original copy of a credit memorandum? What is the copy used for? 41. What is the account Sales Returns and Allowances a contra account to? What is the normal balance side of Sales Returns and Allowances? 6

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