Question 1

Which of the following statements is NOT correct?

Accepted Answer

In a periodic inventory system, the merchandise inventory and purchasing systems are not integrated with the records for Accounts Receivable and Sales Revenue. Instead, the inventory account is updated only when a physical count is taken at the end of a reporting period.

Question 2

The perpetual inventory system keeps a running computerized record of inventory and cost of goods sold.

Accepted Answer

The perpetual inventory system is designed to keep a continuous and up-to-date record of inventory and cost of goods sold. This is done through a computerized system that tracks each inventory transaction, including sales, purchases, returns, and adjustments, in real-time. As a result, businesses can use this system to monitor their inventory levels, identify trends, and make informed decisions about ordering and pricing products.

Question 3

For each of the following statements,state whether it applies to a periodic inventory system (periodic)or a perpetual inventory system (perpetual).

Accepted Answer

The answer of For each of the following statements,state whether...

Question 4

An invoice can be either a sales invoice or a purchase invoice.

Accepted Answer

This statement is true. A sales invoice is issued by a seller to a buyer as proof of a sale and payment obligation, while a purchase invoice is issued by a supplier to a buyer as proof of purchase and payment obligation.

Question 5

In a periodic inventory system,the Cost of Goods Sold account is continuously updated as and when sales occur.

Accepted Answer

A periodic inventory system requires businesses to obtain a physical count of inventory to determine the quantities on hand.

Question 6

When a company uses a perpetual inventory system,all merchandise transactions are updated as they occur.However,the inventory account may not show the correct balance at all times.

Accepted Answer

While a perpetual inventory system updates transactions as they occur, there may still be discrepancies in the inventory account balance due to errors in recording transactions or physical inventory counts.

Question 7

Even in a perpetual inventory system,the business must count its inventory at least once in a year.

Accepted Answer

Even though perpetual inventory systems continuously track inventory levels, it is still important to physically count and verify inventory at least once a year to ensure accuracy and identify any discrepancies. This is known as a physical inventory count or stocktake.

Question 8

A modern perpetual inventory system ________.

Accepted Answer

A modern perpetual inventory system achieves better control over inventory by continuously tracking inventory levels and costs, allowing for real-time inventory management and more accurate financial information.

Question 9

In a perpetual inventory system,the physical count of inventory ________,

Accepted Answer

The answer of In a perpetual inventory system,the physical count...

Question 10

Provide definitions for the following:

Accepted Answer

The answer of Provide definitions for the following:
 ...

Question 11

An invoice is a request for payment from the purchaser.

Accepted Answer

An invoice is a seller's request for payment from the purchaser.

Question 12

List,and briefly discuss,two differences between the income statement of a service company and the income statement of a merchandise company.

Accepted Answer

The answer of List,and briefly discuss,two differences between the income...

Question 13

City Market,a small-scale grocer,wants to introduce an inventory system to track its inventory.The cash registers are not computer terminals.The perpetual inventory system is most suitable for its operations.

Accepted Answer

The perpetual inventory system is most suitable for stores that have optical-scanning cash registers.

Question 14

List the three steps,in order of occurrence,of the operating cycle of a merchandising business.

Accepted Answer

The answer of List the three steps,in order of occurrence,of...

Question 15

In a periodic inventory system,the "cash register" at the store is a computer terminal that records sales and updates inventory records.

Accepted Answer

In a perpetual inventory system,the "cash register" at the store is a computer terminal that records sales and updates inventory records.

Question 16

In a periodic inventory system,merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

Accepted Answer

In a perpetual inventory system,merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

Question 17

Regarding a periodic inventory system,which of the following statements is incorrect?

Accepted Answer

The periodic inventory system is normally used for relatively inexpensive goods, not expensive goods. This is because the cost of continuously tracking and updating inventory levels for expensive goods would be too high. Restaurants and small retail stores normally use the periodic inventory system, and physical count of inventory is required to determine the quantities on hand. However, periodic inventory systems are becoming less popular as technology has made it easier and more cost-effective to use perpetual inventory systems.

Question 18

An invoice is also known as a bill.

Accepted Answer

This statement is true. An invoice is a written or electronic document sent to a customer by a seller, indicating the products or services rendered along with the amounts due for payment. This document is also commonly referred to as a bill.

Question 19

Merchandise inventory accounting systems can be broadly categorized into two types.They are ________.

Accepted Answer

The two types of merchandise inventory accounting systems are perpetual and periodic. FIFO and LIFO are methods of costing inventory, not types of accounting systems. Wholesale and retail, as well as manufacturer and producer, do not describe the accounting systems used to track merchandise inventory.

Question 20

Which of the following is NOT recorded in a modern perpetual inventory system?

Accepted Answer

A perpetual inventory system records all units purchased, units sold, their cost amounts, and the quantity of inventory on hand along with its cost. However, it does not record the timeliness of vendor deliveries, as this information is not relevant to determining inventory levels or value.

Quiz 5: Merchandising Operations