Fundamentals of Financial Accounting Ch. 6
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Created by:
bradleybrave15 on October 2, 2011
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20 terms
Terms | Definitions |
|---|---|
 Bank Reconciliation | An internal report prepared to verify the accuracy of both the bank statement and the cash accounts of a business or individual |
| Cash | Money or any instrument that banks will accept or deposit and immediate credit to a company's account |
| Cash Equivalents | Short-term, highly liquid investments purchased within three months of maturity |
| FOB Destination | A term of sale indicating that goods are owned by the seller until they are delivered to the customer |
| FOB Shipping Point | A term of sale indicating that goods are owned by the customer the moment they leave the seller's premises |
| Gross Profit (Gross Margin) | Net sales minus cost of goods sold. it is a subtotal, not an account |
| Gross Profit Percentage | A ratio indicating the percentage of profit earned on each dollar of sales, after considering the cost of products sold |
| Imprest System | A process that controls the amount paid to others by limiting the total amount of money available for making payments to others |
| Internal Controls | Methods to protect against theft of assets, enhance the reliability of accounting information, promote efficient and effective operations, and ensure compliance with applicable laws and regulations |
| Manufacturing Company | Sells goods that it has made itself |
| Merchandising Company | Sells goods that have been obtained from a supplier |
| Multistep Income Statment | Presents important subtotals, such as gross profit, to help distinguish core operating results from other, less significant terms that affect net income |
| NSF (Not Sufficient Funds) Check | They arise when the check writer (your customer) does not have sufficient funds to cover the amount of the check |
| Periodic Inventory System | Inventory records are updated "periodically," at the end of the accounting period. To determine how much merchandise has been sold, this system requires that inventory be physically counted at the end of the period |
| Perpetual Inventory System | Inventory records are updated "perpetually," every time inventory is bought, sold, or returned |
| Sales Discount | A sales price reduction given to customers for prompt payment of their account balance |
| Sales Returns and Allowances | Refunds and price reductions given to customers after goods have been sold and found unsatisfactory |
| Segregation of Duties | An internal control designed into the accounting system to prevent an employee from making a mistake or committing a dishonest act as part of one assigned duty, and then also covering t up through another assigned duty |
| Service Company | Sells services rather than physical goods |
| Voucher System | A process for approving and documenting all purchases and payments on account |
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