Financial Accounting Exam 2 Questions With Correct Answers
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Course
Financial Accounting
Institution
Financial Accounting
Financial Accounting Exam 2 Questions
With Correct Answers
Inventory - answerMerchandise that the company intends to sell to its customers
Merchandising Companies - answerCompanies that sell, but not manufacture, merchandise to
customers; wholesale and retail companies such as Wal-Mart, Nieman ...
Sales Returns and Allowances - answer✔Contra-revenue account used to record customer
refunds or credits given to their accounts. Represents a reduction of sales revenue for the return
of (or allowance granted for) unsatisfactory goods
Sales Discounts - answer✔Contra-revenue account used to record discounts given to customers
for early payment of their account
Freight-Out - answer✔Transportation cost paid by the seller on merchandise deliverd to the
customer; this is a selling expense, not a contra-revenue account; not included in net sales
Net Sales - answer✔Gross Sales less all contra-revenue accounts (sales returns and allowances
and sales discounts)
Gross Purchase Cost - answer✔Measures the cost of inventory acquired as billed to the company
by the supplier
Purchase Returns and Allowances - answer✔Account used to record the decrease of the purchase
cost for the return of (or allowance granted for) unsatisfactory goods purchased
Purchase Discounts - answer✔Account used to record the decrease of the purchase cost for
discounts granted by the supplier for early payment of account payable
Freight-In - answer✔Account used to record the increase in the purchase cost of inventory due to
transportation costs paid by the buying company; included in net purchases
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