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Unformatted text preview: Accounting 25 Final Exam December 18, 2009 Instructor: Ewan Paymah, CPA 1. What is the difference between a Service Company and a Merchandising Company? How can you change a Service Company to a Merchandising Company in QuickBooks? 5 points Service companies provide intangible services, and have no inventory on their balance sheet. Service companies have the simplest accounting. These companies carry no inventory as a service provider. A service companys balance sheet is the most simple. It notes a companys service revenue less any related expenses (i.e. salary, fuel, depreciated, to determine the operating income). Merchandising companies resell products that are purchased from suppliers. Merchandising companies keep an inventory on hand and managers are responsible for purchasing, storage and sale of the products. The income statement for merchandising companies report Cost of Goods Sold (COGS) as one of their major expenses. The COGS section shows the flow of product cost through the inventory. The product costs are considered inventory because the products are held in inventory until sold. Merchandising companies utilize the following formula to determine the COGS for a business: Beginning Inventory + Purchases + Freight In Ending Inventory = COGS. To change a Service Company to a Merchandising Company in QuickBooks: Use the Easystep interview to enter information and preferences for the new company Edit the chart of account; modify the chart of account ro customize it for the new business. Create list: customer list, vendor list, item list, Employee List. Record Transaction; enter business transaction After preparing adjusting entries, print financial report 2. What is the importance of the Preferences menu in QuickBooks? Give two examples of how the preferences menu is used. 5 points. You can Customize many parts of the QuickBooks file through preferences. Examples of how the preferences menu is used To set sales tax preferences in QuickBooks Financial Software: 1. Open QuickBooks Financial Software and your company file. 2. From the Edit menu, select PREFERENCES . 3. Select SALES TAX to display the preferences tabs for Sales Tax. 4. Select the Company Preferences tab . 5. If you charge sales tax, make sure the response for Do You Charge Sales Tax? Is YES, and then continue with the steps below. If you do not charge sales tax, make sure the response for Do You Charge Sales Tax? Is NO, then select OK. No further steps are necessary. To display Accounts Numbers: 1. From the Edit menu, select PREFERENCES . 3. Select Accounting icon in the left scrollbar 4. Select Use Account Number s to display account numbers in the chart of accounts 5. Then click OK What are the procedures for establishing an existing company that has assets and liabilities including inventories, accounts receivables and accounts payables in QuickBooks. 10 points...
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