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chapt. 9 audit your understanding
Terms in this set (14)
What allows a corporation to own property, incur liabilities, and enter into contracts in its own name?
A corporation, through the rights granted in its
charter, has the legal rights of a person.
What is the principal difference between the
accounting records of proprietorships and
Proprietorships have a single capital and drawing
account for the owner. A corporation has separate
capital accounts for the stock issued and for the
earnings kept in the business.
What is the relationship between a controlling account
and a subsidiary ledger?
The sum of the subsidiary ledger accounts is equal
to the balance in the general ledger controlling
What column on a general ledger form is not on an
accounts payable ledger form?
What is the difference between a periodic inventory
system and a perpetual inventory system?
With a periodic inventory system, the value of the
inventory is determined by a physical count. With a
perpetual inventory system, the value of the
inventory on hand is determined by a continuous
record of increases and decreases.
When the perpetual inventory system is used, in what
account are purchases recorded? In what account are
purchases recorded when the periodic inventory system is
In a perpetual inventory system, purchases are
recorded in the Merchandise Inventory account. In a
periodic inventory system, purchases are recorded
in the Purchases account.
Identify the four special journals typically used by a
Purchases journal, cash payments journal, sales
journal, cash receipts journal
How are special amount columns used in a journal?
Special amount columns are used for frequently
Why are there two account titles in the amount column
of the purchases journal?
All transactions for purchasing merchandise on
account involve a debit to Purchases and a credit to
What is the advantage of having special amount
columns in a journal?
Using special amount columns eliminates writing
general ledger account titles in the Account Title
column, which saves time and helps to reduce
What information is contained on a purchase invoice?
A purchase invoice lists the vendor name and
address; the date; the quantity, description, and
price of each item; and the total amount of the
Why should a business frequently post from the
purchases journal to the accounts payable ledger?
Posting frequently to the accounts payable ledger
helps ensure that vendor accounts are paid on time
and that the business can continue purchasing
goods and services on account.
Why is it important to record a posting reference in the
accounts payable ledger?
It provides an audit trail that allows an employee to
trace the transaction back to the journal and page
Why is the vendor number written in the Post. Ref.
column of the purchases journal?
To provide an audit trail to the account where the
transaction was posted
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