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73 Cards in this Set
- Front
- Back
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Purchase Orders
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Before an order can be placed the proper employee signs approval of specific amounts and types of inventory
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Receiving Reports
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When a shipment arrives, employee matches the purchase order to the contents of the shipment and records when the shipment was received and when it was moved to storage
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Voucher Package
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Before an invoice is paid, the purchase order and matching receiving reports are reviewed and attached to the vendor's invoice
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The costs assigned to the Cost of Goods Sold and the Ending Inventory must equal...
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The Costs of Goods Available for Sale
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Cost of Goods Available for Sale equals...
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Inventory's beginning balance and the cost of goods purchased during the current period
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LISH and FISH
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LISH - is for FIFO, last in, still here
FISH - is for LIFO, first in, still here |
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What did LIFO evolve from?
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...the federal tax policy... companies switched so that profits would be lower and therefore, the tax liability would be reduced
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How do you calculate Weighted Average?
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The total costs of goods for the sale at the time of the calculation divided by the # of units available for sale at the time of the calculation... then multiply the units sold by the average cost.
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The weighted average results fall in-between...
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FIFO and LIFO
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In periods of Rising Prices...
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draw chart!
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What is LIFO reserve?
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With LIFO, the understated value of inventory grows, a LIFO reserve develops... grows more in periods of rising prices
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What is Lower of Cost Market (LCM) Valuation? Also known as...?
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When the market value of inventory is lower than its cost, then the inventory account must be written down to its market value rather than keeping it at cost. Also known as "current replacement cost"
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What is Net Realizable Value?
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...how much will the company really get for the inventory... used hwen inventory is spoiled or damaged
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Effect of Misstating Inventory on the Income statement, the following are affected...
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Cost of Goods Sold... Gross Profit... Net Income
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Effect of Misstating Inventory on the Balance Sheet, the following are affected...
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Inventory... Current Assets... Total Assets... Retained Earnings
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Cash includes...
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(1) Cash in the registers
(2) Cash in checking and savings (3) Checks (4) Money Orders |
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Cash Equivalents include...
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(1) Treasury Bills
(2) Commercial paper (3) Money Market Funds (4) less than 90 days, highly liquid investments (5) must be readily convertible to cash (6) must be insensitive to changes in interest rates |
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What is Bank Reconciliation?
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... a method of control over cash... an analysis of the items that cause cash as reporte don the bank statement to differ from cash balance on the company's ledger.
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Where to Outstanding Checks go?
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Subtract from bank balance
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Where to Deposits in Transit go?
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Add to bank balance
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Errors go where?
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May occur in either bank or book balance... most errors are made by the company...
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Service Charges go where?
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Subtract from book balance
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NSF checks go where?
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Subtract from book balance.
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What are the three objectives of Internal control?
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(1) to safecuard all assets from theft and fraud
(2) Ensure production of accurate financial information (3) Ensure compliance with laws and regulations, GAAP |
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SOX changed the emphasis to be placed on internal controls by both...
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(1) Management
(2) Auditors |
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The Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework includes what 5 elements?
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(1) Control Environment
(2) Risk Assessment (3) Control Activities (4) Communication & Information (5) Monitoring |
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What two limitations are there with internal controls?
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(1) People make mistakes
(2) Consider the costs vs benefit |
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Define Receivables
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... amounts due in cash from customers and others
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When a receivable occurs because of a sale it is considered...
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... a trade receivable
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Define Accounts Receivable...
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... exprected to be collected in 30-60 days... INFORMAL
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Define Notes Receivable...
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...FORMAL written instrument of credit... may be used to settle an over-due AR, short of long term, normally involves interest
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What is the entry to record sale of AR?
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DR Cash, DR Service Charge Expense, CR Accounts Receivable
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Define net realizable...
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... what the company expects to collect in cash... assets must not be overstated...
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Define Bad Debt Expense...
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... uncollectible represents an operating expense called bad debt expense
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What are the two methods of dealing with uncollectible accounts?
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(1) Direct write-off method
(2) Allowance for Doubtful Accounts |
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Journal the adjusting entry for an allowance method...
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*Bad debt expense is an estimate and recorded as an adjusting entry
DR Bad Debt Expense CR Allowance for Doubtful Accounts |
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The Allowance is what type of account? Is it permanent or not?
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... contra asset account... yes, permanent.
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Journal an account identified as uncollectible...
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DR Allowance, CR A/R
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When a previously written off account is recovered... what two entries are required?
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(1) DR A/R, CR Allowance for Doubtful Accounts
(2) DR Cash, CR Accounts Receivable |
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5 Terms for Notes Receivable...
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(1) Maker
(2) Payee (3) Maturity Value (4) Maturity Date (5) Face Value |
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When a note is received from the maker, the payee will...
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DR Notes Receivable and CR Cash, Sales Revenue, OR A/R
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Define an Honored Note
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when paid in full at maturity date
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Define a Dishonored Note
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when not paid in full at maturity
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Journal an Honored Note...
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DR Cash, CR N/R, CR Interest Revenue/Receivable
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Journal the adjusting entry for an honored note with interest...
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DR A/R, CR Interest Revenue
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Journal a Dishonored Note...
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DR A/R, CR N/R, CR Interest
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What are the three categories of long term assets?
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(1) Fixed Assets
(2) Natural Resources (3) Intangible assets |
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What 3 issues must be addressed when dealing with long term assets?
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(1) How to record their cost
(2) How to expense their cost (3) How to record their disposals |
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Define Fixed Assets...
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... tangible assets used in a company's operations for more than 1 accounting period (usually one year)
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What re the 4 categories of fixed assets?
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(1) Land
(2) Land Improvements (3) Buildings (4) Equipment |
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Fixed Assets are also called...
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Property, Plant and Equipment
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Define Capital Expenditures...
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...costs that are first recorded in a balance sheet account as a fixed asset and expensed over years.
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Journal an improved asset...
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DR fixed asset account
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Journal an extended asset...
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DR Accumulated Depreciation
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Define Revenue expenditures...
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... costs that are expensed because they are recurring and ordinary maintenance and repairs.
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Land...
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(1) Title and attorney fees
(2) Real Estate commissions (3) Recording fees and any other closing costs |
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Land Improvements...
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(1) Parking Lots
(2) Driveways (3) Fence (4) Lighting |
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Buildings...
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(1) Cost to purchase...
(2) Remodeling (3) Architect fees, building permits, excavation, interest to finance construction |
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Equipment
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(1) Sales tax
(2) Freight (3) Insurance during transit (4) Reconditioning equipment (5) Assembly (6) Installation (7) Testing |
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Journal Depreciation of assets...
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DR Depreciation Expense, CR Accumulated Depreciation
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3 methods of recording depreciation...
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(1) Straight Line
(2) Double Declining Balance (3) Units of Production |
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How do you calculate Depreciable Cost?
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Acquisition Cost - Salvage/Residual Value
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How do you calculate Straight Line method?
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Divide Depreciable cost by the number of useful years!
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Define Double Declining... how to calculate?
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... applies a constant rate % to declining book value... Apply the rate to the asset's acquisition cost during the first year, then apply the same rate to the book value for all remaining years til you reach the residual value
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Define Book Value
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... the difference between the acquisition cost (amount in the asset's account) and accumulated depreciation
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How to calculate Units of Production method...
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(1) Depreciable cost divided by the total units of activity during the asset's life = Cost per unit
(2) Then Cost per unit times # of units for the period = depreciation expense! |
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What is MACRS?
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Modified Accelerated Cost Recovery System
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How to Record Disposal SALES...
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(1) DR A/D, CR Asset to remove from books
(2) DR Cash, DR A/D, CR Asset, CR Gain if sale is larger than book value (3) DR Cash, DR A/D, CR Asset, DR Loss is sale is less than book value |
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How to Record Disposal RETIRED...
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(1) Gain is not possible, just loss
(2) DR A/D and DR Loss, CR Asset |
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Define Natural Resources
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... assets physically consumed when used... also called wasting resources
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Define Intangible Assets...
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... rights, privileges, and competitive advantages that result from ownership of long-live assets that do not possess physical substance.
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What are the 4 types of intangibles?
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(1) Patent, 20 years
(2) Copyright, 70 years (3) Trademark, 10 years, renewable (4) Goodwill: results from the purchase of another company for more than the fair market value of the acquired company's net assets (assets - liabilities) |
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Expense is also called...
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... Amortization... DR Amortization expense, CR intangible account
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