Accounting Exam 2

Front 1

How do you compute gross margin?

Back 1

Sales – COGS = GM

Front 2

What type of account is COGS?

Back 2

Expense Account

Front 3

Explain COGS

Back 3

Cost of goods sold represents the price that you paid for the goods that you sold. It is an expense account and will be closed to income summary.

Front 4

internal controls

Back 4

actions and policies which a company uses to safeguard its assets, maintain correct accounting records, encourage efficiency, and promote adherence to company policies

Front 5

All good internal controls include some aspects of the following concepts (6)

Back 5

1. The use of competent, reliable employees.
2. The appropriate assignment of responsibility to detail.
3.Transactions are clearly authorized.
4. Provision for the separation of duties.
5. Performance of both internal and external audits.
6. Maintenance of proper documentation and records.

Front 6

Human Resource Management

Back 6

the field within business which focuses on the individuals that work for a business entity

Front 7

cash equivalents

Back 7

short term investments such as US treasury bills

Front 8

signature cards

Back 8

PROVIDE THE BANK WITH THE SIGNATURES OF INDIVIDUALS AUTHORIZED TO USE AN ACCOUNT

Front 9

deposit tickets

Back 9

provide records of dates and amounts of deposits

Front 10

checks

Back 10

authorize the bank to pay cash from an account to another person or entity

Front 11

bank statement

Back 11

periodically sent to the owner of the account and which describes all transactions that occur in the account during a specific time period

Front 12

What are the common events that cause differences between bank statement and account records?

Back 12

1. Events that the company has already recorded, but the bank has not.
2. Events which the bank has recognized but which the company has not yet recorded.
3. Errors by either the company or the bank.

Front 13

What are some examples of events that the company has already recorded, but the bank has not?

Back 13

a. deposits of cash and checks which the company records at the time of receipt before forwarding to the bank - known as outstanding deposits.
b. Checks which the company has written for payment to another entity which the company has recorded but which have not yet been presented to the bank for payment - outstanding checks.

Front 14

outstanding deposits

Back 14

deposits of cash and checks which the company records at the time of receipt before forwarding to the bank

Front 15

outstanding checks

Back 15

Checks which the company has written for payment to another entity which the company has recorded but which have not yet been presented to the bank for payment

Front 16

What are some examples of events which the bank has recognized but which the company has not yet recorded?

Back 16

a. Cash collected directly by the bank on behalf of the owner fo the checking account.
b. This period's bank service charges or other fees, such as charges for checks.
c. Interest revenue on checking accounts.
d. Non-sufficient funds or NSF check.

Front 17

NSF check

Back 17

company has received payment in the form of a check. When check reaches the bank it is informed that there are not enough funds and the check bounces.

Front 18

What are the steps in a bank reconciliation?

Back 18

1. Start with balance per bank statement.
a. add deposits in transit
b. subtract outstanding checks.
2. Use balance per company books
a. add cash collected by the bank
b. Add interest revenues on the checking account.
c. subtract any bank service charges, charges for checks, NSF checks, or other charges.
3. Correct all errors on the bank or company books.
4. compute the adjusted bank balance and book balance and compare.
5. Make journal entries for items in 2 above and make any correcting journal entries for errors on company books.

Front 19

residual value

Back 19

the value of an asset at the end of its useful life