Match the following definitions with the appropriate terms.

Question

A) Selling expenses
B) Multiple-step income statement
C) Merchandise inventory
D) Inventory shrinkage
E) Acid-test ratio
F) FOB destination
G) Trade discount
H) General and administrative expenses
I) FOB shipping point
J) Single-step income statement

1. A measure of a company's ability to pay its current liabilities that excludes less liquid current assets such as inventory and prepaid expenses.
2. A widely used income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.
3. The point of transfer from seller to buyer that takes place when the goods arrive at the buyer’s place of business.
4. Products a company owns and intends to sell.
5. The expenses that support a company’s overall operations and include costs related to accounting, human resource management and financial management.
6. The point of transfer from seller to buyer that takes place when goods depart the seller’s place of business.
7. Inventory losses that can occur as a result of theft or deterioration and require an adjusting entry to account for those losses.
8. An income statement format that shows detailed computations of net sales and other costs and expenses, and reports subtotals for various classes of items.
9. A given percent deducted from a list price often granted to customers purchasing large quantities of merchandise.
10. The expenses of promoting sales by displaying and advertising merchandise, making sales, and delivering goods to customers.

Answer 1

1. E) Acid-test ratio
2. J) Single-step income statement
3. F) FOB destination
4. C) Merchandise inventory
5. H) General and administrative expenses
6. I) FOB shipping point
7. D) Inventory shrinkage
8. B) Multiple-step income statement
9. G) Trade discount
10. A) Selling expenses