Ch. 5 - Accounting for Retail Businesses
1. The accounting for a , like Dollar Tree, is more complex than for a service company. This is because a service
company sells only services and has no .: retailer
inventory
2. Retail businesses sell merchandise that they have purchased from other companies to .: consumers
3. Companies selling the merchandise to retailers are called or
.: suppliers or vendors.
4. The transactions between suppliers and retailers are .: called busi- ness-
to-business (B2B) transactions
5. Transactions between retailers and consumers are called .: busi-
ness-to-consumer (B2C) transactions.
6. The operating cycle is the process by which a company , ,
and .: spends cash, generates revenues, and receives cash from cus- tomers
7. The operating cycle of a service and retail business differs in that a retail business must .: purchase
merchandise for sale to customers
8. On the income statement for a service business, the revenues from services are reported as .: fees earned
9. The operating expenses incurred in providing the services are subtracted from the fees earned to arrive at .:
operating income
10.In contrast, the revenue activities of a retail business involve the buying and selling of .: merchandise
11.A retail business first purchases merchandise to sell to its customers. When this merchandise is sold, the
revenue is reported as , and its
cost is recognized as an expense.: sales
12.This expense is called the or . The cost of goods sold is subtracted
from sales to arrive at gross profit. This amount is called gross profit because it is the profit before deducting
operating expenses.: the cost of goods sold or cost of merchandise sold
13.The are subtracted from to arrive at operating income.-
: operating expenses gross profit
14. Merchandise on hand (not sold) at the end of an accounting period is called
or .: inventory or merchandise inventory
15.Inventory is reported as a on the .: current asset
balance sheet
16.As shown in Exhibit 2, NetSolutions' chart of accounts now consists
of three-digit account numbers. The first digit indicates the (1 for
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, Ch. 5 - Accounting for Retail Businesses
assets, 2 for liabilities, etc.). The second digit indicates the (e.g., 11
for current assets and 12 for noncurrent assets). The third digit identifies
the (e.g., 110 for Cash and 123 for Store Equipment).: major financial statement classification
subclassification specific account
17.A large number of individual accounts with a common characteristic can be grouped together in a separate
ledger, called a .: subsidiary ledger
18.The primary ledger, which contains all of the balance sheet and income statement accounts, is then called
the .: general ledger
19.Each subsidiary ledger is represented in the general ledger by a summa- rizing account, called a .:
controlling account
20.Common subsidiary ledgers are: subsidiary ledger,
subsidiary ledger (or creditors ledger), and the subsidiary ledger-
: accounts receivable accounts
payable inventory
21.The accounts receivable subsidiary ledger, or customers ledger, . The controlling account in
the general ledger is .: lists the individual customer
accounts in alphabetical order
Accounts Receivable
22.The accounts payable subsidiary ledger, or creditors ledger, . The controlling account in the
general ledger is .: lists individual creditor accounts in
alphabetical order
Accounts Payable
23.The , or inventory ledger, lists individual inventory by item (bar code) number. The
controlling account in the general ledger is . An
inventory subsidiary ledger is used in a perpetual inventory system.: inventory subsidiary ledger
Inventory
24.Most retail companies also use computerized accounting systems that record similar transactions in
separate journals, which generate purchase, sales, and inventory reports. These separate journals are called .: -
special journals
25.There are two systems for accounting for merchandise transactions:
and .: perpetual and periodic.
26.In a inventory system, each purchase and sale of merchandise is recorded in the inventory
account and related subsidiary ledger.: perpetual
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1. The accounting for a , like Dollar Tree, is more complex than for a service company. This is because a service
company sells only services and has no .: retailer
inventory
2. Retail businesses sell merchandise that they have purchased from other companies to .: consumers
3. Companies selling the merchandise to retailers are called or
.: suppliers or vendors.
4. The transactions between suppliers and retailers are .: called busi- ness-
to-business (B2B) transactions
5. Transactions between retailers and consumers are called .: busi-
ness-to-consumer (B2C) transactions.
6. The operating cycle is the process by which a company , ,
and .: spends cash, generates revenues, and receives cash from cus- tomers
7. The operating cycle of a service and retail business differs in that a retail business must .: purchase
merchandise for sale to customers
8. On the income statement for a service business, the revenues from services are reported as .: fees earned
9. The operating expenses incurred in providing the services are subtracted from the fees earned to arrive at .:
operating income
10.In contrast, the revenue activities of a retail business involve the buying and selling of .: merchandise
11.A retail business first purchases merchandise to sell to its customers. When this merchandise is sold, the
revenue is reported as , and its
cost is recognized as an expense.: sales
12.This expense is called the or . The cost of goods sold is subtracted
from sales to arrive at gross profit. This amount is called gross profit because it is the profit before deducting
operating expenses.: the cost of goods sold or cost of merchandise sold
13.The are subtracted from to arrive at operating income.-
: operating expenses gross profit
14. Merchandise on hand (not sold) at the end of an accounting period is called
or .: inventory or merchandise inventory
15.Inventory is reported as a on the .: current asset
balance sheet
16.As shown in Exhibit 2, NetSolutions' chart of accounts now consists
of three-digit account numbers. The first digit indicates the (1 for
1/
9
, Ch. 5 - Accounting for Retail Businesses
assets, 2 for liabilities, etc.). The second digit indicates the (e.g., 11
for current assets and 12 for noncurrent assets). The third digit identifies
the (e.g., 110 for Cash and 123 for Store Equipment).: major financial statement classification
subclassification specific account
17.A large number of individual accounts with a common characteristic can be grouped together in a separate
ledger, called a .: subsidiary ledger
18.The primary ledger, which contains all of the balance sheet and income statement accounts, is then called
the .: general ledger
19.Each subsidiary ledger is represented in the general ledger by a summa- rizing account, called a .:
controlling account
20.Common subsidiary ledgers are: subsidiary ledger,
subsidiary ledger (or creditors ledger), and the subsidiary ledger-
: accounts receivable accounts
payable inventory
21.The accounts receivable subsidiary ledger, or customers ledger, . The controlling account in
the general ledger is .: lists the individual customer
accounts in alphabetical order
Accounts Receivable
22.The accounts payable subsidiary ledger, or creditors ledger, . The controlling account in the
general ledger is .: lists individual creditor accounts in
alphabetical order
Accounts Payable
23.The , or inventory ledger, lists individual inventory by item (bar code) number. The
controlling account in the general ledger is . An
inventory subsidiary ledger is used in a perpetual inventory system.: inventory subsidiary ledger
Inventory
24.Most retail companies also use computerized accounting systems that record similar transactions in
separate journals, which generate purchase, sales, and inventory reports. These separate journals are called .: -
special journals
25.There are two systems for accounting for merchandise transactions:
and .: perpetual and periodic.
26.In a inventory system, each purchase and sale of merchandise is recorded in the inventory
account and related subsidiary ledger.: perpetual
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