AFE Quiz 12: Accounting for Merchandise Operations

What is the primary difference between a service business and a merchandising business?

A merchandising business sells goods, a service business sells services
A merchandising business does not keep inventory
A service business has a cost of goods sold account
A service business uses perpetual inventory

Which account is used to record the cost of goods sold?

Inventory
Sales
Cost of Goods Sold
Purchases

Which of the following is subtracted from sales to compute net sales?

Cost of Goods Sold
Sales Returns and Allowances
Inventory
Freight-in

What is the formula for gross profit?

Net Sales – Operating Expenses
Net Sales – Cost of Goods Sold
Net Sales + Purchases
Net Sales – Purchases

Under the perpetual inventory system, when merchandise is sold, which accounts are affected?

Only Sales
Only Inventory
Sales and Cost of Goods Sold
Purchases and Inventory

Which of the following is a contra-revenue account?

Sales
Cost of Goods Sold
Sales Returns and Allowances
Inventory

Which term refers to the transportation cost paid by the buyer to get merchandise inventory?

Freight-out
Freight-in
Delivery expense
Sales expense

In a periodic inventory system, when is the cost of goods sold determined?

Each time a sale occurs
At the end of the accounting period
When goods are purchased
When cash is received

Which of the following would NOT appear on a multi-step income statement for a merchandising company?

Gross Profit
Cost of Goods Sold
Net Sales
Purchases

Which account is credited when merchandise is sold for cash in a perpetual system?

Inventory
Sales
Purchases
Cost of Goods Sold

ACCOUNTING for Everyone

AFE Quiz 12: Accounting for Merchandise Operations

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