Question 1

B sold goods to A on credit for $2 000.What is the correct accounting entry to record this transaction in B's books? Ignore GST and cost of sales.

Accepted Answer

Since B sold goods on credit, it means that A owes B money. Therefore, B should debit their accounts receivable (to show that they are owed money) and credit sales (to show the revenue earned). Option A is incorrect because there was no cash received or paid. Option C is incorrect because it incorrectly suggests that B received the money at that point, when in fact the transaction is on credit. Option D is incorrect because it incorrectly suggests that there was a cost associated with the sale.

Question 2

Under the periodic inventory system an income statement cannot be prepared without a/an ____________.It is only after a/an ___________ that the cost of sales can be estimated.

Accepted Answer

Under the periodic inventory system, the cost of goods sold is determined by taking a physical count of inventory, which is known as stocktake. Without stocktake, the cost of sales cannot be estimated and therefore an accurate income statement cannot be prepared. The other choices (error check, virus scan, audit) are not directly related to the periodic inventory system or the preparation of an income statement.

Question 3

In relation to discount terms,what does 2/10,n/30 mean?

Accepted Answer

The discount terms 2/10, n/30 mean that the buyer can deduct 2% from the invoice price if payment is made within 10 days, or the full amount is due within 30 days of the invoice date.

Question 4

To obtain the maximum possible benefit from a cash discount of 2/10,n/30,the buyer should pay the invoice:

Accepted Answer

By paying on the last day of the discount period, the buyer can take advantage of the cash discount (2%) while still having 30 days to pay the remaining balance. This results in a lower cost of goods sold and increases the buyer's profit margin. Paying immediately may not be feasible and waiting until the end of the month results in no benefit from the cash discount. Waiting for the seller to threaten legal action is not a viable option and may result in additional fees and penalties.

Question 5

Under the periodic inventory system inventory purchased is debited to which account?

Accepted Answer

Under the periodic inventory system, inventory purchased is debited to the Purchases account.

Question 6

Which of these is not an advantage of the perpetual inventory system?

Accepted Answer

A perpetual inventory system allows for continuous tracking of inventory levels and allows for the calculation of cost of sales at any time, as well as the identification of stock losses. Therefore, the only option that is not an advantage of the perpetual inventory system is D, as a physical stock-take is still necessary to ensure the accuracy of the system.

Question 7

Under the periodic inventory system,what is the entry for the credit purchase of 10 electric guitars at $250 per guitar,plus GST of 10%?

Accepted Answer

The entry should debit purchases for the full amount of $2500 ($250 x 10 guitars), debit GST outlays for the GST amount of $250 (10% of $2500), and credit accounts payable for the total amount of $2750. This reflects the full cost of the guitars, including the GST that will be payable to the government.

Question 8

Jan sold goods to John for $3300 including GST.John paid his account within the discount period and received a settlement discount of 2%.Using the gross method,which of the following is the correct entry in Jan's books to record the payment by John?

Accepted Answer

The answer of Jan sold goods to John for $3300...

Question 9

B sold goods to A on credit at a price of $2200 including GST.What is the correct accounting entry to record this transaction in B's books?

Accepted Answer

The correct entry involves debiting accounts receivable for the total amount including GST ($2200) and crediting sales for the amount before GST ($2000) and GST collections for the GST amount ($200). This accurately reflects the revenue earned and the GST collected on the sale.

Question 10

Under the perpetual inventory system inventory purchased is debited to which account?

Accepted Answer

Under the perpetual inventory system, when inventory is purchased, the Inventory account is debited to reflect the increase in inventory. This system continuously updates inventory records, including purchases and sales.

Question 11

Under the perpetual inventory system,what is the entry for the credit purchase of 10 electric guitars at $250 per guitar plus GST of $25 each?

Accepted Answer

Under the perpetual inventory system, when goods are purchased on credit, the inventory account is debited for the cost of the goods, and any GST paid on the purchase is debited to a GST outlays (or similar) account. The total amount payable, including the cost of goods and GST, is credited to accounts payable. In this case, the inventory cost is 10 guitars at $250 each, totaling $2500, and the GST is 10 times $25, totaling $250. The total credited to accounts payable is the sum of these amounts, $2750.

Question 12

The purpose of offering a credit customer a discount after the sale has occurred is to:

Accepted Answer

Offering a discount after the sale has occurred encourages the customer to make an early payment of the amount owing, which helps improve cash flow for the business.

Question 13

Under the perpetual inventory system,what is the entry to record the cost price of goods sold on credit?

Accepted Answer

The answer of Under the perpetual inventory system,what is the...

Question 14

Adelaide sold goods to Perth on credit at a price of $4400 including GST.What is the entry to record this transaction in Adelaide's books under either the perpetual or periodic inventory system? (Ignore the transfer to COS required under the perpetual system.)

Accepted Answer

In this transaction, Adelaide sells goods on credit, including GST. The total amount including GST is $4400. The correct entry involves debiting accounts receivable for the total amount including GST ($4400) and crediting sales for the amount excluding GST ($4000, assuming a 10% GST rate), with the difference ($400) credited to GST collections. This reflects the revenue earned from the sale and the GST collected on behalf of the government.

Question 15

In Australia,where most accounting is computerised,the use of the periodic inventory system is declining.Which of the following businesses is still most likely to use the periodic approach to accounting for inventory?

Accepted Answer

Chemist shops typically have a smaller and less complex inventory compared to supermarkets or bookshops. Therefore, they are more likely to use the periodic approach to accounting for inventory.

Question 16

Which of the following is not true of the periodic inventory system?

Accepted Answer

In a periodic inventory system, inventory variances (differences between the physical count of inventory and the inventory records) cannot be identified regularly because the system does not track inventory on a transaction-by-transaction basis. Inventory variances can only be determined after a physical count, which typically occurs at the end of an accounting period.

Question 17

What is the entry to record the return of goods to a supplier under the perpetual inventory system,including GST?

Accepted Answer

When goods are returned to a supplier under the perpetual inventory system, the inventory account is credited and the accounts payable account is debited. Since GST was originally paid on the purchase, it needs to be reversed as well. Therefore, the GST outlays account is credited. This results in a decrease in both inventory and accounts payable, which reflects the return of goods to the supplier. Hence, option D (Debit accounts payable, credit inventory, credit GST outlays) is the correct choice.

Question 18

Under the perpetual inventory system what is the correct entry to record the cost of the sale of 2 reclining chairs sold to a customer at $1100 per chair including GST? The items were originally purchased on credit at $500 each plus GST of $50 per chair.

Accepted Answer

Under the perpetual inventory system, the cost of goods sold is recorded at the time of each sale by debiting the cost of sales and crediting inventory for the cost of the items sold. In this case, the cost of each chair is $500, so for 2 chairs, the total cost is $1000. Hence, the correct entry is to debit cost of sales and credit inventory for $1000.

Question 19

Freight outward paid by the seller is classified as a/an ____________ expense in the seller's income statement.

Accepted Answer

Freight outward paid by the seller is considered a selling expense as it is incurred in the process of delivering the goods to the customer. It is not considered a cost of sales as it is not directly related to the production or acquisition of the goods, nor is it classified as an administrative or financial expense.

Question 20

GST collected on sales is accumulated in a liability account called GST collections and GST paid on purchases is accumulated in an account with a debit balance called GST outlays.What type of account is GST outlays?

Accepted Answer

GST outlays is a liability account with a debit balance because it represents the amount of GST that the business owes to the government. A contra liability account is a liability account with a debit balance and is used to offset a related liability account with a credit balance. Therefore, GST outlays is a contra liability account.

Quiz 6: Accounting for Retailing