Hodges Ltd Uses a Subsidiary Ledger and Control Account System

question 41

Multiple Choice

Hodges Ltd uses a subsidiary ledger and control account system for its accounts receivable. At the end of the accounting period a list of customers' accounts and balances owing is prepared from the subsidiary ledger. The purpose of this customer list is to:

• A) determine the amount that should be posted to the accounts receivable control account.
• B) establish whether the total debits and total credits in the subsidiary ledger are equal.
• C) provide information necessary for the completion of the trial balance.
• D) prove that the subsidiary ledger agrees with the control account.

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Definitions:

Entry Barriers

Obstacles that prevent or hinder new competitors from easily entering an industry or area of business.

Competitive Price-Searcher

A market characteristic where firms actively seek to set prices competitively, often through differentiation, to attract customers.

Long-Run Equilibrium

A state in which all firms in a market are making just enough profit to stay in business, with no incentive for new firms to enter or existing firms to exit.

Price Taker

A market participant that accepts the market price as given and has no influence to alter the price of the good or service they buy or sell.