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Test #2 Accounting 101 Study Guide

Terms in this set (27)

Sales revenue minus cost of goods sold is
Gross Profit
Once operating expenses are deducted from gross profit that net income is the
Difference
Is the one asset most susceptible to misaprpotion or misuse
Cash
An entry to record the replenishment of a petty cash includes a
Credit to cash
A receivable represented by a formal instrument is a
Note receivable
Free On Board shipping
FOB
When accounting for receivables one must consider
recognizing, valuing, and disposing
The fraud triangle and thus contributing factors to fraud include
Opportunity, financial pressures, and rationalization
Beginning inventory (+) Plus purchases equals (=)
Cost of goods available for sale
Is partially defined as a plan that safeguard assets
Internal Control
When 2 or more people work together to circumvent controls what has occurred?
Collusion
The independent internal verification principal involves
Reconciliations, comparisons, and reviews
Is calculated by adding(+) purchases to beginning inventory and subtracting(-) ending inventory
Cost of goods sold
Is calculated after each sale in a perpetual inventory system and at the end of the period in a periodic inventory system
Cost of goods sold
Is reported as a current asset on the balance sheet
Inventory
Determines the cost flow assumption it will use in accounting for its inventory
Management
The one acceptable exception to making disbursements by check is through the use of a petty cash system which is established to make what?
Small expenditures
When using the allowance method to account for uncollectible accounts bad debt expense is
Debited when management makes an estimate of uncollectibles
The percentage of sales method or bias of estimating expected uncollectibles emphasizes
Matching Revenues & Expenses
Using the direct write off method one would make an entry to debit bad debt Expense
Only when account is determined to be uncollectible
Sales Revenues are recognized when earned when the obligation is met -Such as a transfer of goods to the seller
Regardless of when cash is received
What is the entry to record a credit sale of merchandise
Current Asset
If an organization fails to record an estimate for bad debt expense then expenses are
Understated and net receivables are overstated
When writing off an account under the allowance method only balance sheets accounts are affected
(Accounts receivable and allowance for doubtful accounts)
FOB shipping point
Buyer pays the shipping
FOB destination
Seller pays the shipping
The existing balance of allowance for doubtful accounts is considered when computing bad debt expense using
Percentages of receivables basis or method
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