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ACCT 2001 Exam 2M

Terms in this set (53)

bank reconciliation
internal report used to compare the bank statement with the company's cash records and should be prepared by an employee whose duties are separate from recording and handling of cash
order of steps in documenting and controlling purchases in voucher system
1. purchase requisition
2. purchase order after suppliers and prices have been approved
3. prepare a receiving report
4. supplier invoice and journal entry
deposits in transit
add to bank
fraud triangle parts
incentive, opportunity, rationalization
principles of internal control
segregate duties
document procedures
establish responsibilities
independently verify
restrict access
outstanding check
subtracted from the bank balance
interest revenue
added to book
NSF check
subtract from book
EFT
add to book
direct deposit
An automatic deposit of a paycheck without having to take a physical check to the bank.
employee fraud categories
corruption
asset misappropriation
financial statement fraud
SOX provisions to encourage honesty
whistle-blower protection
anonymous tip lines
code of ethics
outstanding checks
written but have not yet cleared the bank
segregate duties
do not make one employee responsible for all parts of a process
establish responsibility
assign each task to only one employee in order to allow one to determine who is at fault for an error or theft
restrict access
do not provide access to assets or information unless it is needed to fulfill the assigned task
document procedures
prepare documents to show activities that have occurred
independent verification
check others' work
total amount of cash to be recorded on balance sheet
petty cash on hand an
cash and cash equivalents equal
cash in bank accounts + money market funds & time deposits maturing in less than 90 days
Write off account
AFDA
accounts receivable
record estimated bad debt losses
bad debt expense
AFDA
A/r
initial debit balance + credit sales - collections - write off
AFDA
initial credit balance - write off + estimated bad debts
interest earned
principal rate time (x/12)
receivables turnover ratio
net credit sales/average net accounts receivable
inventory
current asset on the balance sheet available for sale
sales revenue
selling price x quantity sold
CGS
cost times quantity sold
gross profit
subtotal on the income statement, = amount earned from adding value to the inventory sold
income statement line items in order
sales revenue, gross
sales R&A
sales discounts
sales revenue, net
CGS
gross profit
Goods Available for Sale Equation
beginning inventory + purchases
Days to Sell
365/inventory turnover ratio
-average number of days from purchase to sale
-a higher number means a longer time to sell
- low = good
Inventory Turnover Ratio
cost of goods sold/average inventory
If cost of acquiring inventory is rising, LIFO will result in
income tax expense will be lower, gross profit will be lower and CGS will be higher
which financial statements will be misstated if the year 1 ending inventory balance is understated
year 1 balance sheet
year 1 income statement
year 2 income statement
gross profit
net sales - cost of goods sold
how is an error in year 1 ending inventory offset?
misstating year 2 cost of goods sold
lower of cost or market rule
rule that merchandise inventory should be reported in the financial statements at whichever is lower - its historical cost or its market value
is LIFO or FIFO not allowed by IFRS
LIFO is not allowed by IFRS
collection of a previously written off account
recovery
journal entry to record a write off
AFDA
a/r
factoring agreement
...
Factoring Costs recorded as
sales expense
Cash and Cash Equivalents
cash deposited by banks, petty cash on hand, and cash equivalents (short term, highly liquid investments purchased within three months of maturity)
restricted cash (short term)
current asset
Deferred Revenue
current liability
equation to find CGS
Net Sales - Gross Profit = CGS
CGS equation
BI + P - EI = CGS
estimate shrinkage
subtract cost of ending inventory counted from that recorded by the perpetual inventory system
find cost of inventory
purchases
less: purchase returns
less: purchase discounts
find net sales
sales revenue (gross)
less: sales discounts
Goods on consignment are
recorded in a consignment out account which is an inventory account
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