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38 Cards in this Set
- Front
- Back
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service business vs merchandising business
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service: fees earned-operating expenses=net income, revenue reported as fees earned
merch: sales-cost of goods sold=gross profit,-operating expenses=net income |
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operating cycle
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purchase, sell, collect money. longer operating cycle means higher profit margins (jewelry store)
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account form balance sheet
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assets on left liabilities on right
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report form balance sheet
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downward sequence 3 sections: assets liabilities stockholders equities
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cash
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asset
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accounts receivable
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asset
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merchandise inventory
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asset
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office supplies
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asset
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prepaid insurance
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asset
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land
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asset
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store equipment
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asset
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accumulated depreciation
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asset
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office equipment
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asset
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accounts payable
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liability
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salaries payable
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liability
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unearned rent
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liability
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notes payable
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liability
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capital stock
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stockholder's equity
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retained earnings
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stockholder's equity
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dividends
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stockholder's equity
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income summary
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stockholder's equity
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sales
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revenue
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sales returns and allowances
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revenue
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sales discounts
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revenue
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interest expense
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other expense
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rent revenue
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other income
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FOB shipping point
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buyer pays freight cost, debit merchandise inventory
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FOB destination
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seller pays freight cost, debits delivery expense
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perpetual inventory system
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each purchase and sale of merch is recorded
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periodic inventory system
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inventory records don't show amount available of sale or amount sold during period, cost of merch sold and merch on hand are determined at end of period by physically counting it
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FIFO
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cost of merch on hand at end of period is made up of the most recent costs (#units left at most recent price)
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LIFO
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cost of merch on hand at end of period is made up of the earliest costs (#units left x original price)
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sarbanes-oxley act of 2002
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public companies must issue internal control report every year, have independent auditors evaluate internal controls, accounting firms can't both audit and consult for same client, created oversight board to oversee auditors, established jail terms for violators
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internal control elements
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control procedures, risk assessment, information and communication, monitoring, (control) environment
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cash shortage
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debit
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cash overage
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credit
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petty cash debited:
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when fund is established or increased
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petty cash credited:
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when fund is decreased
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