Match Each Definition with the Correct Term Below

question 40

Multiple Choice

Match each definition with the correct term below.
-Sales returns and allowances account

• A)An inventory system in which the inventory not yet sold or on hand is counted periodically.
• B)Management's regular assessment of the quality of internal control.
• C)An account that accumulates the total cost of merchandise purchased for resale during an accounting period.
• D)The policies and procedures that management puts into place to see that its directives are carried out.
• E)The seller bears the transportation costs to the place where merchandise is delivered and title passes at the time it is delivered.
• F)An inventory system in which continuous records are kept of the quantity and cost of individual items as they are bought and sold.
• G)The total cost of merchandise that could be sold in an accounting period.
• H)The buyer bears the shipping costs of merchandise and title passes at the time it is shipped.
• I)An account that gives management a readily available measure of unsatisfactory products and dissatisfied customers.
• J)Controls that limit access to assets.

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Definitions:

Margin of Safety

The extent by which sales can fall before reaching the break-even point.

Break-even Sales

The amount of revenue required to cover all fixed and variable expenses associated with producing and selling a product.

Dollars

A unit of currency used in various countries, including the United States, associated with financial transactions, savings, and debts.

Net Operating Income

The total profit of a company after operating expenses are subtracted from gross profit, but before deducting interest and taxes.