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Merchandising Operations and Financial Transactions Quiz

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#1

Which financial statement summarizes a company's revenues and expenses over a specific period?

Income Statement
Explanation

Summarizes company's financial performance.

#2

Which inventory costing method assumes that the first units purchased are the first ones sold?

FIFO (First-In, First-Out)
Explanation

Assumes earliest inventory sold first.

#3

Which financial statement reflects a company's financial position at a specific point in time?

Balance Sheet
Explanation

Provides snapshot of company's assets, liabilities, and equity.

#4

What is the primary purpose of the cash flow statement?

To provide information about the company's cash receipts and payments
Explanation

Shows cash inflows and outflows.

#5

What is the term for the total amount of money a company owes to its suppliers for goods and services purchased on credit?

Accounts Payable
Explanation

Represents company's short-term liabilities.

#6

In merchandising operations, what is the term for the cost of goods sold plus the ending inventory?

Gross Profit
Explanation

Represents company's profitability.

#7

Which accounting principle requires that expenses be recorded in the same period as the related revenues?

Matching Principle
Explanation

Ensures accurate financial reporting.

#8

What is the term for the excess of net sales over the cost of goods sold?

Gross Profit
Explanation

Represents company's profitability.

#9

In double-entry accounting, what must happen to maintain the accounting equation (Assets = Liabilities + Equity)?

Debit an asset and credit equity
Explanation

Maintains balance in the accounting equation.

#10

What is the term for the total amount of money received from customers for goods or services sold?

Revenue
Explanation

Income generated from sales.

#11

Which inventory costing method assumes that the last units purchased are the first ones sold?

LIFO (Last-In, First-Out)
Explanation

Assumes most recent inventory sold first.

#12

In a perpetual inventory system, when are the costs of goods sold (COGS) recorded?

When goods are sold
Explanation

Recorded at the time of sale.

#13

What is the term for the process of transferring information from the journal to the ledger?

Posting
Explanation

Records financial transactions.

#14

In the context of financial transactions, what does the term 'contra account' refer to?

An account used to offset another account
Explanation

Offsets specific account balances.

#15

What is the primary purpose of a trial balance?

To ensure that debits equal credits
Explanation

Verifies accuracy of recorded transactions.

#16

In merchandising, what is the formula for calculating the cost of goods sold (COGS)?

Beginning Inventory + Net Purchases - Ending Inventory
Explanation

Calculates cost of goods sold.

#17

In accounting, what is the term for the process of allocating the cost of an intangible asset over its useful life?

Amortization
Explanation

Spreads cost of intangible asset over time.

#18

What is the formula for calculating the gross profit margin?

(Net Sales - Cost of Goods Sold) / Net Sales
Explanation

Measures profitability relative to sales.

#19

In double-entry accounting, what is the term for the left side of an account?

Debit
Explanation

Represents amounts taken out or expenses.

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