Question

True or False?

1. Merchandise inventory consists of products that a company acquires to resell to customers.

2. A service company earns net income by buying and selling merchandise.

3. Gross profit is the same as gross margin.

4. Cost of goods sold is also called cost of sales.

5. A wholesaler is an intermediary that buys products from a manufacturers or other wholesalers and sells them to consumers.

6. Goods in transit are automatically included in a company's inventory account.

7. If damaged & obsolete goods cannot be sold they are not included in inventory.

8. Goods on consignment are goods shipped by their owner, called the consignee, to a party called the consignor.

9. If obsolete or damaged goods can be sold, they will be included in inventory for realizable value.

10. If the seller is responsible for paying freight charges, then ownerships is passed when goods arrive at their destination.

11. A properly designed internal control system is a key part of accounting information systems design, analysis and performances.

12. The use of internal controls provides guaranteed protection against losses due to operating activities.

13. Internal control policies and procedures are the same for all companies

14. Maintaining adequate business records is an important internal control principle.

15. Proper internal control means that the responsibility for a task is clearly established and assigned to one person.

16. Accounts receivables occur from credit sales to customers

17. Credit sales are recorded by crediting an account receivable for the specific customer who is making the purchase

18. As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers

19. If a customer owes interest on accounts receivable, the interest revenue account is debited and account receivable is credited

20. If a credit card sale is made, the seller can either debit cash or debit accounts receivable when the sale occurs.

Answer 1

1. Merchandise inventory consists of products that a company acquires to resell to customers. - True

Inventory are purchased for resale

2.A service company earns net income by buying and selling merchandise. - False

It earns income by providing services

3. Gross profit is the same as gross margin. - True

4. Cost of goods sold is also called cost of sales - True

5. A wholesaler is an intermediary that buys products from a manufacturers or other wholesalers and sells them to consumers. - False

Wholesaler sells to Retailers and not to consumers.

6. Goods in transit are automatically included in a company's inventory account. -False

Inventory account includes goods which are in the earehouse or factory

7. If damaged & obsolete goods cannot be sold they are not included in inventory. - True

8. Goods on consignment are goods shipped by their owner, called the consignee, to a party called the consignor. - False

its goods shipped by consignor to a party called consignee

9. If obsolete or damaged goods can be sold, they will be included in inventory for realizable value. - True

10. If the seller is responsible for paying freight charges, then ownerships is passed when goods arrive at their destination. - True

11. A properly designed internal control system is a key part of accounting information systems design, analysis and performances. - True

12. The use of internal controls provides guaranteed protection against losses due to operating activities. - True

13. Internal control policies and procedures are the same for all companies - False

14. Maintaining adequate business records is an important internal control principle. - True

15. Proper internal control means that the responsibility for a task is clearly established and assigned to one person. - True

When problem occurs it becomes easier to identify who is at fault

16. Accounts receivables occur from credit sales to customers - True

17. Credit sales are recorded by crediting an account receivable for the specific customer who is making the purchase - False

Accounts receivable is debited and sales is credited

18. As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers - False

Seperate accounts for specific customer help to clasify debtors customer wise and ageing wise

19. If a customer owes interest on accounts receivable, the interest revenue account is debited and account receivable is credited - False

Interest Receivable a/c   is debited and interest income account is credited

20. If a credit card sale is made, the seller can either debit cash or debit accounts receivable when the sale occurs. -True