Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

A check involves 3 parties: a maker who signs the check, a payee who is the recipient, and a bank on which the check is drawn.

The percent of sales method for estimating bad debts uses only income statement account balances to estimate bad debts.

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The maturity value of the note is: (Use 360 days a year.)

Spencer Co. decides to establish a petty cash fund with a beginning balance of $200. The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is:

Meng Co. maintains a $300 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $80 for office supplies, $160 for merchandise inventory, and $20 for miscellaneous expenses. There is a cash shortage of $8. The journal entry to replenish the fund on January 31 is:

A receiving report is a document used within a company to notify the appropriate persons that ordered goods have been received and to describe the quantities and condition of the goods.

A company’s current ratio is 1.2 and its quick ratio is 0.25. This company is probably an excellent credit risk because the ratios reveal no indication of liquidity problems.

Sellers generally prefer to receive notes receivable rather than accounts receivable when the credit period is long and the receivable is for a large amount.