In the accounting books of a company, the account "Purchases of goods" is recorded and accordingly it is used until the end of the year and the drawing up of its financial statements. a) Explain the meaning of the term, quoting a transaction with the relevant accounting entry appearing in the books of the company in question. b) Explain how the 'Purchases of Goods' account affects 'Cost of goods sold' and 'Result for the period'.

In the accounting books of a company, the account "Purchases of goods" is recorded and accordingly it is used until the end of the year and the drawing up of its financial statements. a) Explain the meaning of the term, quoting a transaction with the relevant accounting entry appearing in the books of the company in question. b) Explain how the 'Purchases of Goods' account affects 'Cost of goods sold' and 'Result for the period'.

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter2: Audits Of High-risk Accounts

Section2.9: Powder River Petroleum International, Inc.

Problem 2Q

See similar textbooks

Similar questions

Under accrual accounting, when should a company that sells merchandise to customers recognize revenue? immediately after the cash is collected in the period the revenue was earned, whether payment is received or not in the period following sale in the period prior to the sale
For each of the following, indicate whether the item would be reported on the balance sheet (B/S),reported on the income statement (I/S), or not shown in the financial statements (Not) and whetherit relates to a service company (SC) or merchandising company (MC).Financial Statement Type of CompanyInventorySales RevenueCost of Goods Available for SaleService Revenue
The Sales Returns and Allowances account is reported as a a. Contra-revenue account on the income statement b. Current liability on the balance sheet c. Deduction from accounts receivables d. Selling expense on the incone statement
For each of the following, indicate whether it would be reported on the balance sheet (B/S),reported on the income statement (I/S), or not shown in the company’s financial statements (Not)._____ a. Sales Revenue_____ b. Inventory (held on consignment)_____ c. Cost of Goods Sold_____ d. Inventory (out on consignment)
What does the phrase "Revenue is recognized at the point of sale" mean? (Assume the company reports using ASPE.) a.Revenue is recorded in the accounting records when the goods are sold to a customer and reported on the statement of earnings when the cash payment is received from the customer. b.Revenue is recorded in the accounting records and reported on the statement of earnings when the cash is received from the customer. c.Revenue is recorded in the accounting records when the cash is received from a customer and reported on the statement of earnings when sold to the customer. d.Revenue is recorded in the accounting records and reported on the statement of earnings when goods are sold and delivered to a customer.
Identify which one of the following formula is used to calculate the net income of the service companies in an accounting period? a.Net Purchases – Cost of goods sold b.Net Sales – Cost of goods sold c.Services Revenue – Operational and Administrative Expenses d.Operational and Administrative Expenses – Service Revenue
Explain how a retailing firm would determine the cost of goods sold during an accounting period.
Which one of the following commences on the day inventory is purchased and ends on the day the payment for that inventory is collected? Assume all sales and purchases are on credit. A. Inventory period B. Accounts receivable period C. Accounts payable period D. Operating cycle E. Cash cycle
When a company extends credit directly to a customer for a purchase, the sale is recorded as a debit in the O A. customer record B. general ledger O C. cash flow journal D. balance sheet SUBMIT
The account that appears in the chart of accounts for a merchandising entity but not for service entity is a. Accounts receivable b. Advertising expense c. Sales returns and allowances d. Accumulated depreciation
What accounts would you see on a Balance Sheet and/or Income Statement, if a company had inventory?
Which of the following best describes the activities of the accounting function? a. inventory control, accounts payable, fixed assets, and payrollb. fixed assets, accounts payable, cash disbursements, and cost accounting c. purchasing, cash receipts, accounts payable, cash disbursements, and payroll d. inventory control, cash receipts, accounts payable, cash disbursements, and payroll e. inventory control, cost accounting, accounts payable, cash disbursements, and payroll