Bus 204 Test 2

Front 1

service companies operating activities

Back 1

sell services, receive cash, incur operating expenses...

Front 2

merchandising companies operating activities

Back 2

sell products, receive cash, incur operating expenses, buy products...

Front 3

manufacturing companies operating activities

Back 3

sell products, receive cash, incur operating expenses, buy raw materials, make products...
RETAIL
WHOLESALE

Front 4

purpose of internal controls

Back 4

to protect
to serve (promoting efficient and effective operations, alerting co. officials of violations of laws and regulations)

Front 5

importance of bank reconciliations

Back 5

1. bank errors
2. time lags on deposits and checks
3. interest earned
4. service charges
5. customer checks deposited but bounced
6. your errors

Front 6

process of reconciling accounting records and bank statement

Back 6

1. identify DOT's
2. identify outstanding checks
3. record other transactions on the bank statement
4. determine the impact of errors

Front 7

nsf checks

Back 7

not sufficient funds checks

Front 8

segregation of duties

Back 8

requires two workers to perform related activities

Front 9

what account is freight-in added to?

Back 9

inventory
(credit cash)

Front 10

purchase returns and allowances

Back 10

a reduction in the cost of inventory purchases associated with unsatisfactory goods

Front 11

purchase discount

Back 11

dr. accounts payable
cr. cash
cr. inventory

Front 12

sales returns and allowances

Back 12

reductions given to customers after goods have been sold and found unsatisfactory
dr. sales ret. and allowances
cr. cash
dr. inventory
cr. COGS

Front 13

sale discount

Back 13

dr. cash
dr. sales discounts
cr. acc. receivable

Front 14

credit card discounts

Back 14

fee charged by a credit card co. for its services
dr. cash
dr. credit card discounts
cr. sales revenue
dr. COGS
cr. inventory

Front 15

gross profit

Back 15

net sales minus COGS

Front 16

gross profit percentage and what it is used for

Back 16

gross profit/net sales
1. analyze changes in the co.'s operations over time
2. compare on co. to another
3. determine whether a co. is earning enough on each sale to cover operating expenses

Front 17

pros and cons of credit to customers

Back 17

1. increased employee costs
2. bad debt costs
3. delayed receipt of cash

Front 18

allowance method for bad debt

Back 18

1. record an estimated bad debt expense
2. remove specific customer balances in the period determined uncollectible
dr. bad debt exp
cr. allowance for doubtful accounts
dr. allowance for doubtful accoutns
cr. accounts receivable

Front 19

recovery of a bad debt written off

Back 19

dr. accnts rcvble
cr. allwnce for dbtfl accnts
dr. cash
cr. accnts rcvble

Front 20

methods of estimating bad debts

Back 20

1. percentage of credit sales
2. aging of accnts receivable

Front 21

interest equation

Back 21

interest=P X R X T

Front 22

receivables turnover ratio

Back 22

net credit sales revenue/ave net trade receivables

higher=faster collection of receivables and then more cash available

Front 23

days to collect

Back 23

365/receivables turnover ratio

ave. number of days to collect

Front 24

factoring receivables

Back 24

an arrangement where receivables are sold to another co. for immediate cash minus a factoring fee

Front 25

inventory management goals

Back 25

1. ensure sufficient quantities of inventory are available to meet customers needs
2. ensure inventory quality meets customers' expectations and co. standards
3. minimize costs of acquiring and carrying inventory

Front 26

important factors in managing inventories

Back 26

1. inventory cost
2. quality
3. quantity
4. product innovation

Front 27

goods included in inventory

Back 27

1. goods held for sale
2. used to produce goods

Front 28

where is inventory recorded?

Back 28

balance sheet as a current asset

Front 29

manufacturers inventories

Back 29

1. raw matierials
2. works in process
3. finished goods

Front 30

materiality

Back 30

relatively small amounts may be recorded and reported in most cost-beneficial way

Front 31

4 inventory cost methods

Back 31

LIFO FIFO weighted average, specific identification

Front 32

weighted average cost

Back 32

cost of goods available for sale/# of units anaivlable for sale

Front 33

lower of cost or market
(LCM)

Back 33

valuation rule that requires the inventory account to be reduced when the value of the inventory falls to an amount less than its cost

Front 34

inventory turnover

Back 34

COGS/ave inventory

measures how quickly inventory moves from purchase or production to customer

Front 35

days to sell

Back 35

365/turnover ratio

Front 36

long lived assets

Back 36

will not be used up in next year
1.tangible
2.intangible

Front 37

capitalizing costs

Back 37

recording costs as assets
general rule for tangible assets under cost principle:all reasonable and necessary costs of acquiring and preparing an asset for use should be capitalized

Front 38

capital lease

Back 38

long term agreement between two co.s accounted for like a credit purchase

Front 39

capitalized interest

Back 39

interest expenditures included in the cost of a self-constructed asset

Front 40

maintenance costs incurred during use of tangible assets

Back 40

1.ordinary reparis and maintenance:routine operating upkeep recorded as expenses
2.extraordinary repairs, replacements and additions, increase asset's economic usefulness in future, recorded as assets

Front 41

depreciation methods

Back 41

straight line
units of production
declining balance

Front 42

declining balance depreciation

Back 42

(cost-acc. dep)(2/useful life)

note that residual value is not included so must watch that accumulated depreciation does not over-depreciate

Front 43

system used to calculate deprecition expense for tax returns

Back 43

MACRS
modified accelerated cost recovery system
not acceptable for financial reporting purposes

Front 44

asset impairment losses

Back 44

dr. loss due to impairment of assets
cr. rides and equipment

Front 45

disposal of tangible assets

Back 45

dr. depreciation expense
cr. accumulated depreciation
ex.
dr. cash
dr. acc. depreciation
cr. buildings
cr. gain on sale of hotel building

Front 46

types of intangible assets

Back 46

trademarks, copyrights(70 yrs, literary, musical,artistic,dramatic), patent(20yrs, product, procss), licensing rights, technology franchise, goodwill

Front 47

how are costs of selfconstructed intangibles reported?

Back 47

research and development expenses

Front 48

net assets

Back 48

assets minus liablilities

Front 49

goodwill

Back 49

purchase price-fair market value of assets=goodwill to be reported

Front 50

how to record amortization in journal

Back 50

patent amortization exp.
acc. amortization

Front 51

fixed asset turnover ratio

Back 51

net sales rev/ ave net fixed assets

measures the sales dollars generated by each dollar invested in fixed assets

Front 52

operating lease

Back 52

rent fixed asset but do not record as asset on balance sheet so fixed asset turnover ratio is higher