After closing of revenue accounts,expense accounts and Income Summary account, it is timeto prepare post-closing trial balance as the ending step in the accounting cycle.

The correct answer to question is option A. Effective internal control to be established in enterprises aims to prevent errors and frauds that may occur by all employees in order to achieve their goals and targets. The option of reducing the fees of the independent audit may be considered false. Because the company's effective internal control may not eliminate the need for external audit. Assurances that are in compliance with government regulations are not actions of internal control in the enterprise, but an action that may be provided to ensure internal control. Option D may be considered false because the reliability and integrity of management decision-making information can help senior management make effective decisions. Internal control is accurate because it provides reasonable assurance that the objectives of operations, reporting and compliance are achieved. 

Percentage of sales basis is the percentage relationship between the amount of credit sales and estimated losses from uncollectible accounts. In a situation where a company has been in a business for a long time, it might be able to use historical relationships between bad debts and net credit sales to estimate bad debts amount. This approach is based on historical or past experience and forecasted credit policies. This approach is also called an “income statement approach” because of its focus on the size and amount of expense. Usually a percentage is applied to either total credit sales or credit sales (net) of the current accounting year. 

50 X 500= 25,000TL X %3 =>750 TL discount

Inventory Turnover Ratio measures number of times a company sells average level of merchandise inventory during a period.

The correct answer is B.

The correct answer to question is option A. According to the COSO Report, an internal control system must include five interrelated components at the same time to be effective. These five components are the control environment, risk identification, control activities, IT and communication and monitoring. In order to establish internal control in the enterprise, information and communication systems should be monitored and risk assessments should be made. Organizational structure, management philosophy and planning components need to be considered by senior management to establish internal control, but do not fully express the components of internal control. Likewise, the components expressed in other embodiments do not fully express the internal control components.

Merchandising companies purchase the goods that are ready to be sold and sell them to generate revenue. Considering the type of their customers, merchandising companies are called either as retailer or whole seller.

The consistency principle holds that companies should use the same accounting methods and procedures in each accounting period, so that the information provided will help investors and creditors to compare a company’s financial statements from one period to the next. For example, assume that you are analyzing a company’s net income over a two-year period in which there was a decrease in net income from the first year to the second. The correct answer is C.

Sales returns and allowances reduce the amount of accounts receivables since the customer delivers back the goods or the company waives a portion of its claim due to product defects. The correct answer is D.

Firms often believe that they are able to forecast bad debts if they relate them to the balance in the Account Receivable account at the end of the period instead of the sales of that period. Under the percentage of Account receivable approach, companies establish a percentage relationship between the amount of account receivables and forecasted losses from bad debts accounts. Although this method is using account receivable rather than sales, the objective of both the approaches remain the same, i.e. the company uses past experience with bad debts to determine future amounts.

Cash (net) realizable value shows the credit sales price adjusted for returns, discounts, and allowances expected to be collected from customers. The correct answer is E.

When purchasing inventory on account, imerhandise inventory account is debitted. Account payable account is credited.

Perpetual Inventory System is a system of tracking and recording inventory and costs of goods sold on a continual basis, so current inventory balance can be calculated on real time basis, and the accounting system can display the current inventory balance at any point in time.

Aging of accounts receivable is the analysis of customer balances with respect to the length of time they have not been paid.

Service companies, such as hospitals, hotels, law firms etc., provide services to demanding parties without incurring any manufacturing or trading activities.

The First-In, First-Out (FIFO) method assumes that the earliest goods purchased arethe first to besold. Under the first-in, first-out (FIFO) method, the cost of goods sold is based on the oldest purchases – that is, the first units to come in are assumed to be the first units to go out of the warehouse (sold). FIFO costing is consistent with the physical movement of inventory (for most companies). That is, under the FIFO inventory costing method, companies sell their oldest inventory first.

If customers are unsatisfied with the goods they purchased, because of defects or for other reasons, seller may reduce the initial price at which the goods were sold to pursue the customers to keep the goods. It is sales allowance.

A company must perform strictly proper accounting only for items that are significant to the business’s financial situation according to the materiality concept requirements.

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Internal control is a process, affected by an entity’s board of directors,management, and other personnel,designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.