Deck 8: Accounting for Purchases and Accounts Payable

Question 1

If an amount recorded in the general journal requires two postings, a diagonal line is used to separate the two posting references in the posting reference column.

Answer 1

True

Question 2

When an accounts payable subsidiary ledger is used, the entry to Accounts Payable requires two posting references in the general journal.

Answer 2

True

Question 3

The supplier's invoice is the source document for a purchase on credit transaction.

Answer 3

True

Question 4

The use of a purchases journal strengthens the audit trail.

Question 5

Individual amounts in the purchases journal are posted to the general ledger during the month.

Question 6

The Purchases Returns and Allowances account has a normal debit balance.

Question 7

The entry to record the return of merchandise purchased on credit includes a debit to Accounts Payable and a credit to Purchases Returns and Allowances.

Question 8

To show that the totals of the amount columns in the purchases journal were posted, the appropriate account numbers are written in parentheses below the totals.

Question 9

Freight In and Purchases Returns and Allowances are deducted from Purchases to determine the net delivered cost of purchases.

Question 10

A balance that is circled in the accounts payable ledger is a credit balance.

Question 11

No amounts are posted from the purchases journal to the accounts payable subsidiary ledger during the month.

Question 12

If a business uses pre numbered purchase orders, it is not necessary to account for every purchase order.

Question 13

At the end of the accounting period the total of the accounts in the accounts payable subsidiary ledgers need not agree to the total in the firm's accounts payable ledger account.

Question 14

Whenever a sales department needs goods, it sends the purchasing department a form called a(n) ____________________.

Question 15

A purchase of supplies on account should be recorded in the purchases journal.

Question 16

The discounts that are offered by suppliers to encourage quick payment of invoices by customers are known as ____________________ discounts.

Question 17

The abbreviation P1 in the Posting Reference column of an account indicates that the data was posted from page 1 of the cash payments journal.

Question 18

The Freight In account should have a(n) ____________________ balance.

Question 19

The amount of a check issued to a creditor is posted from the cash payments journal to the debit column of the creditor's account in the accounts payable subsidiary ledger.

Question 20

A firm's accounts payable ledger may include accounts for creditors who are not suppliers of merchandise.

Question 21

The entry to record a return of merchandise purchased on credit includes a debit to the ____________________ account in the general ledger.

Question 22

Good internal control requires a ____________________ of duties.

Question 23

The Purchases Returns and Allowances account is a(n) ____________________ cost of goods sold account.

Question 24

Purchases returns and allowances are recorded in the ____________________ journal if a firm does not have a purchases returns and allowances journal.

Question 25

Purchases of merchandise on credit should be recorded in

A) the purchases journal.
B) the general journal.
C) the cash payments journal.
D) the sales journal.

Question 26

After a supplier of merchandise is selected, the purchasing department issues a form called

A) a purchase invoice.
B) a purchase order.
C) a sale invoice.
D) a purchase requisition.

Question 27

The entry to record a purchase of merchandise on credit includes

A) a debit to Purchases and a credit to Accounts Receivable.
B) a credit to Purchases and a credit to Accounts Payable.
C) a debit to Accounts Payable and a credit to Purchases.
D) a debit to Purchases and a credit to Accounts Payable.

Question 28

In a small firm, the creditor accounts are placed in ____________________ order in the accounts payable ledger.

Question 29

When an accounts payable ledger is used, the Accounts Payable account in the general ledger becomes a(n) ____________________ account.

Question 30

A list of creditors and the balances owed to them is called a schedule of ____________________.

Question 31

Freight charges on merchandise purchases should be debited to

A) the Purchases account.
B) the Accounts Payable account.
C) the Freight In account.
D) the creditor's account in the subsidiary ledger.

Question 32

Since they are liability accounts, creditor's accounts in the accounts payable ledger normally have ____________________ balances.

Question 33

The form sent to the supplier to order goods is called a(n) ____________________.

Question 34

An allowance received from a creditor is posted to the ____________________ column of the creditor's account.

Question 35

After damaged goods are returned, the supplier issues a(n) ____________________ memorandum.

Question 36

Which of the following statements is not correct?

A) Cash purchases of merchandise are not recorded in the purchases journal.
B) A credit purchase of equipment for use in the business would be recorded in the purchases journal.
C) The Purchases account has a normal debit balance.
D) The invoice date and credit terms must be carefully recorded in the purchases journal because they determine when payment is due.

Question 37

The Purchases account is

A) a permanent account.
B) a temporary account.
C) a subsidiary account.
D) a liability account.

Question 38

Which of the following statements is correct?

A) The purchase requisition is the form sent to a supplier to order goods.
B) The Purchases account is reported as an asset on the balance sheet.
C) To the customer, a supplier's invoice is a purchase order invoice.
D) The credit terms, 2/10, n/30, allow the customer to take a 2 percent discount if payment is made within 10 days of the invoice, otherwise payment is due in full in 30 days.

Question 39

Purchases of merchandise on credit should be recorded in the ____________________ journal.

Question 40

The source document for recording a purchase of merchandise on credit is

A) the purchase order.
B) the purchase invoice.
C) the receiving report.
D) the purchase requisition.

Question 41

A creditor's account in the accounts payable ledger has a $1,600 beginning balance. After a transaction for $700 is posted from the purchases journal, the balance of the creditor's account is

A) $2,300 debit.
B) $900 credit.
C) $2,300 credit.
D) $900 debit.

Question 42

A firm had purchases of $16,200, freight charges of $300, and purchases returns and allowances of $1,100 during one month. Its net delivered cost of purchases was

A) $14,800.
B) $17,600.
C) $16,200.
D) $15,400.

Question 43

The journal entry to record the purchase of merchandise on account for $2,750 with freight of $125 prepaid and added to the invoice is:

A) debit Purchases $2,750; credit Accounts Payable $2,750
B) debit Accounts Payable $2,875, debit Freight in $125; credit Purchases $2,750
C) debit Purchases $2,750, debit Freight In $125; credit Accounts Payable $2,875
D) debit Accounts Receivable $2,875; credit Sales $2,875

Question 44

Postings to the accounts payable ledger should be made

A) daily.
B) weekly.
C) monthly.
D) at the end of the fiscal period.

Question 45

Hugh Snow returned merchandise to Farley Co. The entry on Hugh Snow's books to record the return of merchandise to Farley Co. would include a:

A) Debit Accounts Payable
B) Credit to Purchase Returns and Allowances
C) Debit to Account Receivable
D) Debit Sales Returns and Allowances

Question 46

The amount of the purchases for a period is presented in

A) the Liabilities section of the balance sheet.
B) the Revenue section of the income statement.
C) the Cost of Goods Sold section of the income statement.
D) the Expenses section of the income statement.

Question 47

In a firm that uses special journals, the return of damaged merchandise to a supplier and receipt of a credit memorandum is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 48

In a firm that uses special journals, the issuance of a check to a supplier as a payment on account is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 49

Credit terms of 1/10, n/30 mean that

A) payment in full is due 10 days after date of the invoice.
B) a 1% discount may be taken for up to 30 days.
C) if the invoice is paid within 10 days of its date, a 1% discount may be taken; otherwise the total amount is due in 20 days.
D) if the invoice is paid within 10 days of its date, a 1% discount may be taken; otherwise the total amount is due in 30 days.

Question 50

In a firm that uses special journals, the receipt of a credit memorandum from a supplier for merchandise that was damaged but can be sold at a reduced price is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 51

To record a return of merchandise purchased on credit on the books of the buyer, the accountant would

A) debit Purchases Returns and Allowances and credit Accounts Receivable.
B) debit Purchases Returns and Allowances and credit Purchases.
C) debit Accounts Payable and credit Purchases Returns and Allowances.
D) debit Purchases and credit Purchases Returns and Allowances.

Question 52

In a firm that uses special journals, the purchase of merchandise for cash is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 53

In a firm that uses special journals, the purchase of merchandise with terms of 2/10, n/30 is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 54

Check marks next to the individual amounts in the purchases journal mean that the amounts

A) have been posted to the general ledger.
B) have been posted to the accounts payable subsidiary ledger.
C) have been posted to the accounts receivable subsidiary ledger.
D) do not need to be posted to any account.

Question 55

In a firm that uses special journals, the purchase of merchandise for $2,800, payable in 30 days, plus a freight charge of $140 is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 56

The journal entry to record the purchase on account of $900 of merchandise with freight of $65 prepaid and added to the invoice is:

A) debit Purchases $965; credit Accounts Payable $965
B) debit Accounts Payable $965, debit Freight in $65; credit Purchases $900
C) debit Purchases $900, debit Freight In $65; credit Accounts Payable $965
D) debit Accounts Receivable $965; credit Sales $965

Question 57

When the sales department needs goods, it sends the purchasing department a form called

A) a purchase invoice.
B) a purchase order.
C) a purchase requisition.
D) a sales invoice.

Question 58

Credit purchases of supplies that are to be used in the business are entered in

A) the purchases journal.
B) the general journal.
C) the cash payments journal.
D) the cash receipts journal.

Question 59

Which of the following statements is correct?

A) Freight In is subtracted from Purchases to arrive at delivered cost of purchases.
B) Another name that may be used for the Freight In account is "Transportation In."
C) Freight charges that are listed on the invoice received from a supplier are not part of the total credit to Accounts Payable to record the credit purchase.
D) The Freight In account is subtracted from Sales to get Net Sales.

Question 60

The total of the balances in the individual creditor's accounts should agree with the balance of

A) the Purchases account in the general ledger.
B) the Accounts Receivable account in the general ledger.
C) the Accounts Payable account in the general ledger.
D) the Sales account in the general ledger.

Question 61

The Fast Frame Shop had the following transactions for the month of January 2013. Record the transactions on page 7 of a purchases journal and page 9 of a general journal. Total, prove, and rule the purchases journal as of January 31.

Question 62

At the end of February 2013 and before the purchases journal was posted, selected general ledger account balances for Volter Repair Services were as follows (each account had a normal balance): The purchases journal had the following totals: Purchases, $28,000; Freight In, $1,000; Accounts Payable, $29,000.
Calculate the ending balance of each of the three accounts after the posting from the purchases journal. Indicate whether each balance is a debit or credit.

Question 63

Match the accounting terms with the description by entering the proper letter in the space provided.

Question 64

The Picture Perfect Camera Shop had the following transactions for the month of August 2013. Record the transactions on page 7 of a purchases journal and page 9 of a general journal. Total, prove, and rule the purchases journal as of August 31.

Question 65

One of the supplier accounts from the accounts payable ledger for Paragon Video is shown below. Explain each of the entries that have been posted to this supplier's subsidiary ledger account.

Question 66

For each of the transactions listed below, identify the journal that should be used to record the transaction. Use CR for cash receipts journal, CP for cash payments journal, S for sales journal, P for purchases journal, and G for general journal.

Question 67

Explain each of the following credit terms.

A) n/30
B) n/10 EOM
C) 2/10, n/30
D) 1/10, n/20
E) 3/5, n/30

Question 68

One of the supplier accounts from the accounts payable ledger for Thompson Consulting Services is shown below. Explain each of the entries that have been posted to this supplier's subsidiary ledger account.

Question 69

Read the description of the following transactions that are recorded during the accounting period for Drummond Consulting Services. Determine the account to be debited and the account to be credited.

A) Purchased merchandise with terms of net 30 days.
B) Returned some damaged merchandise to a supplier and received a credit memorandum.
C) Issued a check to a supplier as a payment on account.
D) Received an allowance for some merchandise that was slightly damaged but can be sold at a reduced price. Received a credit memorandum.
E) Purchased merchandise with terms of 2/10, n/30. The supplier's invoice includes a freight charge.

Question 70

Tune Tones Instrument Tuning Company owes Mandy Lynn's Music Studio $4,856 as of November 1. During November Tune Tones purchased merchandise from Mandy Lynn totaling $8,495 and made payments on account to Mandy Lynn in the amount of $7,250. The amount Tune Tones owes Mandy Lynn on November 30 is:

A) $6,101
B) $3,611
C) $10,889
D) $7,250

Question 71

At the end of September 2013 and before the purchases journal was posted, selected general ledger account balances for Paper Products were as follows (each account had a normal balance): The purchases journal had the following totals: Purchases, $19,540; Freight In, $1,225; Accounts Payable, $20,765.
Calculate the ending balance of each of the three accounts after the posting from the purchases journal. Indicate whether each balance is a debit or credit.

Question 72

The purchases journal for Carothers Company is shown below. Describe how the amounts would be posted to the general ledger accounts.

Question 73

Which of the following accounts has a normal debit balance?

A) Purchases
B) Purchase Returns
C) Accounts Payable
D) Sales

Question 74

During March a firm purchased $22,650 of merchandise and paid freight charges of $1,720. If the net delivered cost of purchases for the March is $21,900, what is the total purchase returns for March?

A) $0
B) $2,470
C) $970
D) $3,440

Question 75

The purchases journal for Wright Company is shown below. Describe how the amounts would be posted to the general ledger accounts.

Question 76

A creditor's account in the accounts payable ledger has a balance of $10,560 as of April 1. After a transaction of $12,800 is posted from the purchases journal and a transaction of $9,200 is posted from the cash payments journal, the balance of the creditor's account on April 30 is:

A) $9,200 debit
B) $6,960 credit
C) $14,160 credit
D) $12,800 debit

Question 77

For each of the transactions listed below, identify the journal that should be used to record the transaction. Use CR for cash receipts journal, CP for cash payments journal, S for sales journal, P for purchases journal, and G for general journal.

Question 78

Match the accounting terms with the description by entering the proper letter in the space provided.

Question 79

If a business pays $1,100 on account to a creditor, the effect of the payment is a decrease to cash and a

A) decrease to Fees Income
B) increase of capital
C) increase to accounts receivable
D) decrease to accounts payable

Question 80

Read the description of the following transactions that are recorded during the accounting period for Hughley Consulting Services. Determine the account to be debited and the account to be credited.

A) Issued a check to a supplier as a payment on account.
B) Purchased merchandise; the supplier's invoice, which includes a freight charge, has payment terms of 2/10, n/30.
C) Returned some damaged merchandise to a supplier and received a credit memorandum.
D) Received an allowance for some merchandise that was slightly damaged but can be sold at a reduced price; received a credit memorandum.
E) Purchased merchandise with terms of net 30 days.