Retail Basics
Retail businesses sell goods and services directly to whom?
Consumers
Buying goods from a supplier for resale is called what?
Purchases
What does FIFO stand for in inventory accounting?
First-In, First-Out
At what point in the accounting cycle are adjusting entries made?
At the end of the accounting period
Where are cash and cash equivalents reported in financial statements?
Under Current Assets on the Balance Sheet
What is usually the largest current asset for a retail business?
Inventory
When a customer returns a defective product, what is recorded?
Sales Returns and Allowances
Which inventory method generally reduces taxable income during inflation?
LIFO (Last-In, First-Out)
Recording expired insurance as an expense is an example of adjusting what?
A prepaid expense
What are the three sections of the Statement of Cash Flows?
Operating, Investing, and Financing Activities
This system updates inventory after every purchase and sale. What is it called?
Perpetual Inventory System
A reduction in price given to encourage early payment is called what?
Cash Discount
Which inventory method spreads costs evenly across all units?
Weighted Average Cost (WAC)
Wages earned by employees but not yet paid are recorded as what?
Accrued Liability (or Accrued Wages)
What is the main purpose of internal control in a business?
To safeguard assets and ensure reliable financial reporting
The loss of merchandise from theft, damage, or errors is called what?
Shrinkage
In accounting, sales are recorded at what value?
The selling price of goods
In times of rising prices, which method results in the highest net income?
FIFO
What account is used with Depreciation Expense?
Accumulated Depreciation
Dividing responsibility among employees to reduce fraud risk is called what?
Segregation of Duties
Which entries close revenue, expense, and dividend accounts at the end of the period?
Closing Entries
Recording sales when they are earned follows which principle?
Revenue Recognition Principle
Which inventory method is accepted under U.S. GAAP but not under IFRS?
LIFO
Cash received before services are performed is recorded as what?
Unearned Revenue
Which 2002 law strengthened corporate accountability after major scandals like Enron and WorldCom?
The Sarbanes-Oxley Act (SOX)