Question 1

To verify that the sum of the accounts receivable ledger balances equals the Accounts Receivable balance, a schedule of accounts receivable is prepared.

Accepted Answer

A schedule of accounts receivable lists all the individual amounts owed to a business by its customers. By totaling the balances on this schedule, the business can verify that the sum equals the Accounts Receivable balance recorded in the general ledger.

Question 2

A retail business allows customers to enter the store, select the merchandise they want, and bring it to a sales clerk.

Accepted Answer

This is a common type of retail business model where customers physically enter the store and select merchandise to purchase.

Question 3

If any merchandise has been returned, the sales discount is calculated on the net sales amount.

Accepted Answer

When merchandise is returned, the sales discount is calculated on the net sales amount, which is the original sales amount minus the amount of the merchandise returned.

Question 4

Net sales less sales returns and allowances and sales discounts equal gross sales.

Accepted Answer

Gross sales refer to the total unadjusted sales revenue, while net sales are calculated by subtracting sales returns, allowances, and discounts from gross sales.

Question 5

A credit memo states the amount of a sales allowance or return.

Accepted Answer

A credit memo is used to indicate the amount of a sales allowance or return. It is essentially a document that reduces the amount owed by a customer to a business.

Question 6

After all posting to the general ledger is completed, the accounts receivable, sales tax payable, and sales accounts in the general ledger are up to date.

Accepted Answer

This statement is true. Once transactions related to accounts receivable, sales tax payable, and sales accounts are recorded in the general ledger, those accounts are updated and reflect the most current information.

Question 7

Sales Returns and Allowances is debited for the selling price, including sales tax, of any merchandise returned by customers.

Accepted Answer

Sales Returns and Allowances is debited for the selling price of the merchandise returned, excluding sales tax. Sales tax is accounted for separately.

Question 8

To encourage customers who purchase merchandise on account to pay promptly, a cash discount is usually offered.

Accepted Answer

This statement is true. A cash discount is often offered as an incentive for customers to pay their account promptly.

Question 9

Reductions in the price of merchandise granted by the seller because of defects or other problems with the merchandise are called merchandise sales.

Accepted Answer

Reductions in the price of merchandise granted by the seller because of defects or other problems with the merchandise are called discounts, not merchandise sales.

Question 10

The accounts receivable ledger is simply a detailed listing of the same information that is summarized in Accounts Receivable in the general ledger.

Accepted Answer

The accounts receivable ledger provides additional details on the amount and status of each individual customer's account, whereas the general ledger only provides a summary of all accounts receivable.

Question 11

After the posting of the accounts receivable ledger and the general ledger is completed, the total of the accounts receivable ledger balances should equal the Accounts Receivable balance in the general ledger.

Accepted Answer

This is known as the accounts receivable reconciliation and is an important step in ensuring the accuracy of financial statements. If the totals do not match, it may indicate errors in either the accounts receivable ledger or the general ledger.

Question 12

Selling goods on account is not common practice at the retail level of the distribution process.

Accepted Answer

Selling goods on account is common at the retail level, as it allows customers to purchase items and pay for them later, often through credit accounts or installment plans.

Question 13

Merchandise returned by the customer for a refund is called a sales return.

Accepted Answer

Sales returns are items that are returned by customers for refunds.

Question 14

If the amount of sales returns and allowances is large in proportion to gross sales, a weakness in the merchandising operations is indicated and the trouble should be determined and corrected.

Accepted Answer

A high proportion of sales returns and allowances indicates that there may be issues with the quality of merchandise, customer service, pricing, or other aspects of the merchandising operations. It is important to identify and address these issues to reduce the amount of returns and improve overall performance.

Question 15

A sales ticket is a document created as evidence of a sale in a retail business.

Accepted Answer

A sales ticket serves as proof of a transaction in a retail business.

Question 16

Merchandise returned by a customer for a refund is called a sales discount.

Accepted Answer

Merchandise returned by a customer for a refund is called a return, not a sales discount. A sales discount is a reduction in price given to a customer as an incentive for paying their invoice within a certain timeframe.

Question 17

The sales account is credited for the selling price of merchandise sold during the period.

Accepted Answer

When merchandise is sold, the sales account is credited for the selling price, as this reflects an increase in revenue.

Question 18

The amounts for sales returns and allowances, sales discounts, and net sales added together equal gross sales.

Accepted Answer

This is correct. Gross sales is the total amount of sales made by a company without any deductions. It is calculated by adding up the amounts for sales returns and allowances, sales discounts, and net sales.

Question 19

When a business uses a subsidiary accounts receivable ledger, there is no need to keep an accounts receivable account in the general ledger.

Accepted Answer

Even if a business uses a subsidiary accounts receivable ledger, they still need to keep an accounts receivable account in the general ledger to track the overall accounts receivable balance. The subsidiary accounts receivable ledger only tracks the individual customer accounts.

Question 20

A common approach to keeping a record of each customer's account receivable is to use a subsidiary accounts receivable ledger.

Accepted Answer

A subsidiary accounts receivable ledger is a common way to keep a record of each customer's account receivable. This ledger allows businesses to keep track of each individual customer's purchases, payments, and outstanding balance. Using a subsidiary ledger makes it easier to monitor and manage accounts receivable, and helps to improve the accuracy of financial statements.

Quiz 10: Accounting for Sales and Cash Receipts