Dela Salle University

RVR-College of Business
Accountancy Department
FDNACCT- Fundamentals of Accountancy, Business

Part 1: TRUE OR FALSE. Answer on the Space provided.

1. A merchandising business sells goods that it produces.

A) True
B) False
Answer: False

2. The Sales Returns and Allowances account has a normal debit balance.
A) True
B) False
Answer: True

3. The balance of the Sales Returns and Allowances account is subtracted from the balance
of the Accounts Receivable account in the Assets section of the balance sheet.
A) True
B) False
Answer: False

4. After all postings have been made, the totals of the balances in the accounts receivable
subsidiary ledger should equal the balance of the Accounts Receivable account in the
general ledger.
A) True
B) False
Answer: True
5. When a business makes a sale on a bank credit card, the business is ultimately
responsible for collecting the amount owed from the customer.
A) True
B) False
Answer: False

6. The supplier's invoice is the source document for a purchase on credit transaction.
A) True
B) False
Answer: True

7.
(7) A firm's accounts payable ledger may include accounts for creditors who are not
suppliers of merchandise.
A) True
B) False
Answer: True

(8) 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.
A) True
B) False
Answer: True

(9) The Purchases Returns and Allowances account has a normal debit balance.
a. True
b. False
Answer: False

(10) Freight In and Purchases Returns and Allowances are deducted from Purchases to
determine the net delivered cost of purchases.
 a. True
b. False
Answer: False – it is added to the cost of services

PART 2: Multiple Choice. Choose the correct answer:

1. Which of the following statements is not correct?

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

Answer: A
 2. The Sales account is classified as a(n)
a. liability account. B) asset account.
C) expense account. D) revenue account

1) Identify the statement below that correctly describes the Sales Returns and
Allowances account.
A) It normally has a debit balance. B) It is a liability account.
C) It is an expense account. D) It normally has a credit balance.

3. In a firm that uses special journals, a sale of merchandise on credit is recorded in

the
a. cash payments journal. B) cash receipts journal.
C) purchases journal. D) sales journal.

4. A firm that sells goods that it purchases for re-sale is a

a. merchandising business. B) non-profit business.
C) service business. D) manufacturing business

5. To find the balance due from an individual customer, the accountant would refer to
a. the sales journal.
b. the accounts receivable subsidiary ledger.
c. the Accounts Receivable account in the general ledger.
d. the Sales account in the general ledger.

6. The Sales Returns and Allowances account is presented

a. on the income statement as an addition to Sales.
b. on the income statement as a deduction from Sales.
c. on the balance sheet as a deduction from Capital.
d. on the balance sheet as a deduction from Accounts Receivable.
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 7. A wholesale firm sold merchandise with a list price of $1,800 and trade
discounts of 30 and 15 percent. What amount will be credited to sales
in the sales journal?
A) $1,800 B) $810
C) $990 D) $1,071

8. The amount used by wholesalers to record sales in its sales journal is

a. the retail price. B) the net price.
C) the list price. D) the original price.

9. On the Income Statement, Sales Returns and Allowances have the effect of
a. decreasing total revenue. B) increasing total revenue.
C) increasing total expenses. D) decreasing total expenses.

10. An example of a merchandising company is a

a. bookstore. B) restaurant.
C) real estate office. D) hair salon.

11. Which of the following describes Sales Returns and Allowances?

a. A revenue account with a normal credit balance.
b. A contra revenue account with a normal debit balance.
c. A contra expense account with a normal credit balance.
d. An expense account with a normal debit balance.

12. The amount of the trade discount taken by the customer is recorded as a(n)
a. liability.
b. asset.
c. reduction to the amount recorded as a sale.
d. expense.

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 13. A retailer gives an allowance to a customer for damaged merchandise.
The entry to record the allowance would include
a. A credit to Sales. B) a debit to Cash.
C) A debit to Sales Returns and Allowance D) a debit to Accounts
Receivable.

14. Which of the following statements is correct?

a. The purchase requisition is the form sent to a supplier to order goods.
b. 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.
c. To the customer, a supplier's invoice is a purchase order invoice.
d. The Purchases account is reported as an asset on the balance sheet.

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

called:
a. a sale invoice. B) a purchase requisition.
C) a purchase order. D) a purchase invoice.

16.The entry to record a purchase of merchandise on credit includes:

a. a debit to Purchases and a credit to Accounts Payable.
b. a debit to Purchases and a credit to Accounts Receivable.
c. a debit to Accounts Payable and a credit to Purchases.
d. a credit to Purchases and a credit to Accounts Payable.

17. The Purchases account is:

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

18. Purchases of merchandise on credit should be recorded in:

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

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 PART 3:

Compute for the amount of (1) INVOICE PRICE (2) CASH DISCOUNTS and the (3) NET
AMOUNT for each of the independent cases.

DATE LIST TERMS INVOICE AMOUN PAYME CASH NET CASH

OF PRICE PRICE T NT DISCOUNT PAID on
SALE (1) PAID DATE (2) the date of
final
settlement
(3)
1 June P36,000 Less 2 P35,280 In full June P352.80 P34,927.2
1 1/10, N/30 10
2 July 8 P45,000 Less 5-2 P41,895 40% July 12 P0 16,758
2/10, N/30 partial

3 In full July 18 P837.9 P24,299.1

4 August P65,000 Less 10, P58,500 P15,00 August P0 P20,000

8 P5,000 down 0 18
2/end of partial
month
5 In full August P1,170 P37,330
31

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