Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
71 Cards in this Set
- Front
- Back
|
(This is a helper... DO IT FOR THE TEST)
To better understand each cycle, you should consider the following: (5 things) |
Business Activites
Risks Controls Source Documents Accounting Entries |
|
|
What is the simplified Revenue Cycle (on the slides)
|
1. Sales Order
2. Credit Check 3. Shipping 4. Billing 5. A/R 6. Cash Receipts and or Sales Returns **Specific events and order depend on business model** |
|
|
What are the two variations in the Timing of Order and Payment activity
|
Order first and then pay later
Pay and order at the same time |
|
|
What are the variations of timing of payment and delivery (3).
|
Deliver first and then pay later
Pay first and then deliver pay and deliver at the same time What would examples of these be? |
|
|
What are four payment methods
|
Cash
Check Credit Card Accounts Receivable |
|
|
What does chapter four focus on when dealing with the Revenue System?
|
Alternative Ordering Methods - Order before delivery
Alternative Payment Timing - Payment after delivery Alternative forms of payment - Sales on Account |
|
|
What are the system requirements for the revenue system when it comes to:
Order before Delivery Payment after Delivery Sales on Account |
System requirements are -
Order before delivery - Track orders Payment after delivery - track amount owed by customers Sales on Account: Must track amounts owed by store credit customers. Must bill owners Must collect cash after sale |
|
|
What are the steps in the Expenditure Cycle? (5 of them)
|
1. Purchase Requistion
2. Purchasing 3. Receiving / Inspection 4. A/P 5. Cash Disbursements |
|
|
What are the risks of the expenditure cycle? (8 of them)
|
You may not always:
Purchase from reliable vendors Purchase high quality items Obtain best possible price Purchase only items that are properly authorized Have resources available when they are needed Receive only those items ordered Ensure items are not lost, stolen, or broken Pay for the items in a timely manner |
|
|
Where does the Purchases system begin?
|
It begins in Inventory Control where a purchase requisition(PR) is prepared
|
|
|
What are the three branches (per say) of the Purchases system?
What does each do for an order? |
Inventory Control - purchase requisition
Purchasing - purchase order for each vendor Receiving - Counts and inspects the goods and prepares a receiving report |
|
|
What does A/P do in the Purchases System? (there are threesteps)
|
1. Reconciles the PR, PO, receiving report, and the supplier's invoice.
2. Posts to the purchases journal 3. Records the liability in the accounts payable subsidiary ledger. |
|
|
The A/P reconciles what four documents?
And posts to what 2 books? |
A/P reconciles the PR, PO,receiving report and the suppliers invoice.
A/P posts to purchases journal, and records the liability in the accounts payable subsidiary ledger |
|
|
What is a 2 - way match and a 3 way match?
|
2 way match is reconciling the purchase order with the receiving report
3 way match is reconciling the purchase order, the receiving report and the invoice. |
|
|
The g/l department posts the account payable journal voucher and reconciles _____ with the account summary received from inventory control.
|
the inventory amount
|
|
|
What do the three deparments (a/p, cash disbursements and G/L) do in the cash disbursements system?
|
a/p - searches the open vouchers payable file for items with payments due
cash disbursements - prepares the check and records the information in a check register (cash disbursements journal) G/L updates the general ledger and reconciles accounts payable control account with the subsidiary summary |
|
|
What are some general internal controls when dealing with the expenditure cycle?
|
Segregation of Duties
Supervision Accounting Records/Documentation Authorization Controls Access Controls Verification What examples do we see? |
|
|
What are two examples of segregation of functions?
|
1. revenue cycle - custody of the asset, inventory, by the Warehouse must be separate from record keeping for the assets by the Inventory Control
2. Custody of the asset, cash, by Cash disbursements must be kept separate from record keeping for the asset by A/P |
|
|
What are the segregation of duties
|
warehouse (stores)
inventory control accounts payable general ledger requisitioning purchases purchases returns and allowances cash disbursements |
|
|
Within the expenditure cycle, _________ is of highest imprtance in the Receiving deparment, where the inventory arrives and is logged in by a receiving clerk.
|
supervision
|
|
|
For adequate manual accounting records what must be maintained?
|
accounts payable
vouchers payable checks general ledger subsidiary ledger |
|
|
Puchases of inventory should be authorized by ______ not by _______
|
the Inventory Control department
not by purchasing agents |
|
|
________ authorizes the payments of bills, not the ________________, who writes the checks.
|
Accounts payable
not the cash disbursements clerk |
|
|
What are the manual access controls?
|
Inventories - (direct)
Cash - (direct) Accounting records - (indirect) |
|
|
A/P verifies much of the work done within the expenditure cycle. This work includes:
|
PR, PO, receiving reports and suppliers' invoices
|
|
|
G/L department verifies:
|
total obligations recorded equal the total inventories received
total reductions in accounts payable equal the total disbursements of cash |
|
|
Reveiw the summary of internal controls slide
|
Review the summary of internal controls slide
|
|
|
What are the 4 basic expenditures which need to be considered in the expenditure cycle?
|
1. Inventory/ Freight
2. Expenses 3. Fixed assets 4. Labor |
|
|
What is the purpose of the fixed asset subsidiary ledger
|
sets up the asset with expected life, initial cost, and depreciation schedule
|
|
|
How does fixed assets differ from the general Purchase process?
|
How does fixed assets differ from the general Purchase process?
|
|
|
What is impairment according to the statement of financial accounting standards144?
|
the condition that exists when the carrying amount of a long-lived asset (asset group) exceeds its fair value.
|
|
|
Relevance vs reliability
Why might fair value be beneficial? Why might fair value be difficult? |
Relevance vs reliability
Why might fair value be beneficial? Why might fair value be difficult? |
|
|
What are the payroll cycle documents?
|
personnel action form
time card job ticket |
|
|
Why both (time card and job ticket), what’s the difference?
|
Why both (time card and job ticket), what’s the difference?
|
|
|
The cost accounting department uses the job ticekts to allocate labor costs to ______.
|
WIP accounts
|
|
|
The cost accounting department summarizes these charges in a _______ which is forwarded to g/l department
|
labor distribution summary
|
|
|
The payroll department receives personnel action forms and time cards and uses them to:
prepare the ________ enter the information into the ___________ prepare _________ and to send paychecks to ________ and a copy of the payroll register to ________ |
payroll register
employee payroll records paychecks cash disbursements accounts payable |
|
|
Accounts payable department prepares a _________ for the total amount of the payroll
Sends copies to the ___________ |
cash disbursements voucher
Cash disbursements and G/L departments |
|
|
Cash disbursements department reviews and signs the paychecks and forwards them to a ________ for distribution to the employees.
writes a check for the payroll and deposits it into the __________. |
paymaster
payroll imprest account |
|
|
Why is there a separate payroll account?
|
Why is there a separate payroll account?
|
|
|
Payroll Cycle Entries made by the G/L department:
From the Labor Distribution Summary |
WIP (direct labor) DR
Factory OVerhead (indirect labor) DR Wages Payable CR |
|
|
Payroll Cycle Entries made by the G/L department:
From the Distribution Voucher |
Wages Payable DR
Cash CR Fed. Inc. Tax Withholding payable State Inc. Tax Withholding payable FICA withholding payable Other withholding payable |
|
|
Payroll Cycle Entries made by the G/L department:
to transfer the cash from the operating bank account to the payroll imprest account |
Cash payroll imprest DR
Cash - operating account CR |
|
|
What potential controls exist within the payroll and people cycles?
|
Authorizations
--Personnel action forms to add, modify or delete employees and change wages --Manager signature on time cards Supervision --Who verifies who actually punched in Segregation of Duties --Timekeeping vs payroll Access Controls --Separate bank account (imprest account) Independent verification --verification of accuracy of payroll register by A/P dept. --G/L dept. reconciles the labor distribution summary and the payroll disbursement voucher --Paymaster to distribute paychecks to authorized employees |
|
|
What does the audit trail of accounting records include?
|
Personnel action forms
Time Cards Job Tickets Disbursement Vouchers Labor Distribution Summary Payroll Register Subsidiary Ledger Accounts General Ledger Accounts |
|
|
The conversion cycle transforms input resources, raw materials, labor, and overhead into ____ or ____
|
finished products or services for sale
|
|
|
The conversion cycle consists of two systems
|
the production system
the cost accounting system |
|
|
The production system involves the ___, ____ and _____ of the physical product through the manufacturing process
|
planning, scheduling and physical
|
|
|
The planning, scheduling and control of the physical product through the manufacturing process has to deal with these four things:
|
- determining raw materials requirements
- authorizing the release of raw materials into production - authorizing work to be conducted in the production process - directing the movement of work through the various stages of production |
|
|
There are three production methods. What are they?
|
Continuous processing
batch processing make to order processing |
|
|
creates a homogeneous product through a continuous series of standard procedures.
|
continuous processing
|
|
|
produces discrete groups of products.
|
batch processing
|
|
|
involves the fabrication of discrete products in accordance with customer specifications.
|
make to order processing
|
|
|
What are the documents involved with the Conversion Cycle
|
Sales Forecast
Production Schedule Bill of Materials Route Sheet Work Order Move Ticket Materials Requisition |
|
|
What does each of the following documents share?
Sales Forecast Production Schedule Bill of Materials Route Sheet Work Order Move Ticket Material Requisition |
Expected Demand
Production Plan List of raw material items required sequence of oeprations, expected time authorizes a specific prodcution batch record activities and authorize movement request raw materials inventory |
|
|
Draw the flow chart of the production planning and control slide
|
Draw the flow chart of the production planning and control slide
|
|
|
What does the flow chart look like upon completion of the production process? 4 parts
|
What does the flow chart look like upon completion of the production process? 4 parts
|
|
|
The cost accounting system:
Records the financial effects of the events occurring in the _______. Initiated by the ______. ______ creates a new cost record for the batch and files in WIP file The records are updated as ____ and ____ are used |
production process
work order cost accounting clerk materials and labor |
|
|
What are the elements of the cost accounting system(look at slide)
|
What are the elements of the cost accounting system(look at slide)
|
|
|
Receiptof the last move ticket signals completion of the _______.
|
Production process
|
|
|
What happens Upon completion of the production process?
|
clerk removes the cost sheet from WIP file
prepares a journal voucher to transfer balance to a finished goods inventory account and forwards to the GL department |
|
|
reflect a legitimate need based on sales forecast and the finished goods on hand
|
work orders
|
|
|
authorized signatures from each work station authorize the movement of the batch through the work centers
|
move tickets
|
|
|
authorize the warehouse to release materials to the work centers
|
materials requisition
|
|
|
What are the segregation of duties?
|
--production planning and control department is separate from the work centers
--inventory control separate from materials storeroom and finished goods warehouse --cost accounting function accounts for WIP and should be separate from the work centers in the production process |
|
|
--storerooms, production work centers, and finished goods warehouses
--quantities in excess of standard amounts should require approval |
Direct Access to assets
|
|
|
materials requisitions, excess materials requisitions, and employee time cards
|
indirect access to assets
|
|
|
As a form of internal control these accounting records need to be kept in the conversion cycle
|
pre numbered documents
work orders cost sheets move tickets job tickets material requisitions WIP and finished goods files |
|
|
Supervisors in the work centers oversee the usage of raw materials in the production process to ensure _____
|
all materials released are used in production and waste is minimized
and that employee time cards and job tickets are checked for accuracy |
|
|
what are examples of independent verification for internal controls?
|
--cost accounting reconciles material usage (job tickets) with standards
--GL dept. verifies movement from WIP to FG by reconciling journal vouchers from cost accounting and inventory subsidiary ledgers from inventory control --internal and external auditors periodically verify the raw materials and FGs inventories through a physical count |
|
|
What are the five exam suggestions?
|
What was to be done – Actions
Who was to perform the action – People How do you know if it was done – Documents How do you know if it was done correctly – Controls What could have gone wrong - Risks |
