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(Complete) Chapter 04: Cash and Internal Controls

Terms in this set (201)

The two reasons why companies may issue incorrect financial statements are fraud and______

What happens when errors are discovered?

Companies have to restate the financial statements affected

The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources.

What is ACFE?

The Association of Certified Fraud Examiners.

Fraud occurs when_________

a person intentionally deceives another person for personal gain or to damage that person.

What is the asset most commonly involved with fraudulent activity?

Cash

What is the fraud triangle?

The three elements present for every fraud—motivation, rationalization, and opportunity.

What ore some of the sources of occupational fraud?

1. Misuse of company resources (ex. cash)
2. Financial Statement manipulation ("cooking dem books")

Companies have the greatest ability to eliminate______. (one of the three elements)

Opportunity

What are Internal controls:

A company's plans to
(1) safeguard the company's assets and
(2) improve the accuracy and reliability of accounting information.

Internal Control eliminates ________

Opportunity

Who are the Caretakers of the company's' assets?

The Managers

Reason: The managers are entrusted with the resources of both the company's lender 9liabilities) and its owners (stockholders' equity)

Known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly referred to as SOX, the Sarbanes-Oxley Act is

the act that established a variety of guidelines related to auditor-client relations and internal control procedures.

What does the PCOAB do?

establish standards dealing with auditing, quality control, ethics, independence, and other activities relating to the preparation of audited financial reports.

What is the PCOAB?

The Public Company Accounting Oversight Board

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Verified questions

ACCOUNTING

The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on accounts): $$ \begin{matrix} \text{ } & \text{1st Quarter} & \text{2nd Quarter} & \text{3rd Quarter} & \text{4th Quarter}\\ \text{Budgeted unit sales} & \text{11.000} & \text{12.000} & \text{14.000} & \text{13.000}\\ \end{matrix} $$ The selling price of the company's product is $18.00 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made, 30% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is$70.200. The company expects to start the first quarter 1,650 units in finished goods inventory . Management desires an ending finished goods inventory in each quarter equal to 15% of the next quarter's budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1.850 units. 1. Prepare the company's sales budget and schedule of expected cash collections. 2. Prepare the company's production budget for the upcoming fiscal year.

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ACCOUNTING

FIFO a. Assumes that old goods are sold first and that goods which are on hand are valued at current prices. b. Assumes that new goods are sold first and inventory is valued at old prices. c. Assumes that the cost of current inventory at the conclusion of a period and the cost of goods sold is the overall representation of all the costs that were incurred during this period. d. Assumes that amounts charged as expenses are actual cost of goods sold.

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ACCOUNTING

Aracel Engineering completed the following transactions in the month of June. a. Jenna Aracel, the owner, invested $100,000 cash, office equipment with a value of$5,000, and $60,000 of drafting equipment to launch the company in exchange for common stock. b. The company purchased land worth$49,000 for an office by paying $6,300 cash and signing a longterm note payable for$42,700. c. The company purchased a portable building with $55,000 cash and moved it onto the land acquired in b. d. The company paid$3,000 cash for the premium on an 18-month insurance policy. e. The company completed and delivered a set of plans for a client and collected $6,200 cash. f. The company purchased$20,000 of additional drafting equipment by paying $9,500 cash and signing a long-term note payable for$10,500. g. The company completed $14,000 of engineering services for a client. This amount is to be received in 30 days. h. The company purchased$1,150 of additional office equipment on credit. i. The company completed engineering services for $22,000 on credit. j. The company received a bill for rent of equipment that was used on a recently completed job. The$1,333 rent cost must be paid within 30 days. k. The company collected $7,000 cash in partial payment from the client described in transaction g. l. The company paid$1,200 cash for wages to a drafting assistant. m. The company paid $1,150 cash to settle the account payable created in transaction h. n. The company paid$925 cash for minor maintenance of its drafting equipment. o. The company paid $9,480 cash in dividends. p. The company paid$1,200 cash for wages to a drafting assistant. q. The company paid $2,500 cash for advertisements on the web during June. 1. Prepare general journal entries to record these transactions (use the account titles listed in part 2). 2. Open the following ledger accounts—their account numbers are in parentheses (use the balance column format): Cash (101); Accounts Receivable (106); Prepaid Insurance (108); Office Equipment (163); Drafting Equipment (164); Building (170); Land (172); Accounts Payable (201); Notes Payable (250); Common Stock (307); Dividends (319); Engineering Fees Earned (402); Wages Expense (601); Equipment Rental Expense (602); Advertising Expense (603); and Repairs Expense (604). Post the journal entries from part 1 to the accounts and enter the balance after each posting. 3. Prepare a trial balance as of the end of June.

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ACCOUNTING

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