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Accounting Questions (Inventory, AP, Journals)

1) In a Periodic inventory system, would purchase returns and allowances and purchase discounts be considered contra liability accounts.

2) The accounts payable subsidiary ledger controls the accounts payable account in the general ledger. (True or False)

3) If using a perpetual inventory system, what entry to record the purchase of merchandise on account involve.

4) Assuming the use of special journals, the borrowing of $20,000 from the bank by signing a note payable would be recorded in what book: a) cash receipts journal,( b) sales journal , (c) cash payments journal or (d) general journal

5) If a check is issued to settle an account for $145 was recorded on the books as$1,450. On a bank reconciliation where will this appear. (a) addition to bank balance (b) deduction from the book balance (c) addition to the book balance or (d) deduction from the bank balance.

6) Under the allowance method of accounting for uncollectible accounts, the entry to write off an actual account which is determined to be uncollectible includes a debit to uncollectible -account expense. (true or false)

7) Under the allowance method, if uncollectible account write- offs during the year exceed the allowance amount, the balance in allowance for uncollectible accounts at year end prior to adjustment should be what.
a) zero (b) should be deducted from accounts receivable (c)will be a debit (d) should be adjusted by debiting it to bring the balance back to zero.

Solution Preview

1) In a Periodic inventory system, would purchase returns and allowances and purchase discounts be considered contra liability accounts.

Answer: No

Under the periodic inventory system, we need to debit "Purchases" account when the company purchase new inventory. It is in the group of asset accounts and has a normal debit balance. It has two contra accounts known as "Purchase Returns and Allowances" and "Purchase Discounts" that reduce it to determine "Net Purchases". The balance of these two contra accounts is a credit because "Purchases" is a debit. Contra accounts always have a normal balance that is opposite to what they are contra to. Therefore, they are considered contra asset accounts.

2)The accounts payable subsidiary ledger controls the accounts payable account in the general ledger. (True or False)

Answer: True
For a firm to control adequately its payment to its creditors, additional detail about Accounts Payable must be known: names and addresses ...

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