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34 Cards in this Set
- Front
- Back
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What is a manufacturer?
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Makes goods to sell
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What are the accounts that have to do with manufacturers and inventory (in order)?
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-Materials inventory (asset)
-Work-in-progress inventory -Finished goods inventory -Cost of goods sold |
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What is Just In Time inventory management?
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-Swept industry, when a customer orders something then they order the materials (goods are not produced until ordered)
-More profitable |
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What does Just In Time management entail?
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No ending inventory ever
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What are problems with Just In Time?
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-Vendors don't get you materials on time
-Very fast moving |
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What is the inventory turnover ratio?
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Cost of goods sold/average inventory (which is BI+EI/2)
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How are days-in inventory calculated?
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365/turnover ratio
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What is specific identification?
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Keeps track of individual prices of goods, used for automobile sales
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What is average costing?
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Averages cost of items of goods
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What is First In First Out (FIFO)?
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First good sold was the first one purchased
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What is Last In First Out (LIFO)?
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Last good purchased was the first sold
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What is the method most used in the US and why?
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LIFO makes gross profit look low, which has lower taxes
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What are the pros and cons of FIFO?
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-Pros: cost EI near current
-Cons: COGS out of date |
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What are the pros and cons of LIFO?
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-Pros: tax advantages, costs of COGS are more accurate
-Cons: EI is understated |
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What is lower of cost of market (LCM)?
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-Conservative method
-If there is a serious difference between reality and what you're claiming it must be written down -Applies to spoiled inventory |
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STUDY PERPETUAL VS. PERIODIC
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What is fraud?
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-Dishonest act by employee for his benefit
-Small businesses have more than big -Low-level ppl more likely to commit fraud, but higher-level can cause more harm |
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What are internal controls?
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Controls assets, all companies have, safeguard assets and ensure accounts are correct
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What are specific internal controls?
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-Establish responsibility=different for different, who does what jobs (know who to blame/re-train)
-Segregation of duties=do not let one person control everything about a particular aspect/asset of company -Independent internal verification=people check each other's work -Documentation -Physical protection -Human resources control=background checks, bonding |
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What is bonding?
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HR takes out a bond on an employee, contract from insurance company that if he/she steals insurance would repay. More pressure on employee.
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How doe outstanding checks, deposit in transit, interest, NSF/fees, and electronic payments effect the bank and the books?
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-O/S: bank=negative, books=already
-Dep.:bank=positive, books=already -Interest:bank=already, books=positive -NSF:bank=already, books=negative -Electronic:bank=already, books=postiive |
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What is a cash equivalent?
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Assets so liquid can be changed into cash very quickly (w/in 90 days)
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What is cash management?
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-Plan major purchase (usually property, plant, or equipment)
-Interest in other companies |
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What is a sweep account?
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Bank goes in at close of business, takes cash, and invests overnight. Put money back in account w/ a little interest after
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What are trade receivables?
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Normal sale w/ a customer, notes and accounts receivable
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What is interest receivable?
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Interest on cash
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What is employee advance receivable?
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Paid employee in advance for work
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What is an aging of accounts schedule?
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Divides receivables into how hold they are
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What is the formula for calculating interest?
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Principle (amount borrowed) x annual interest rate x time (x/12)
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What is a note receivable?
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-Usually collect interest on
-Document signed that you will pay back on a certain date |
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What is the receivables turnover ratio?
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Net credit sales/average net receivables (beginning+ending/2)
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What does the receivables turnover ratio tell us?
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How quickly you get receivables, increase/higher is better
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What is the average collection period ratio?
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365/receivables turnover ratio
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What is "factoring receivables"?
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Selling receivables to a business to get cash (but you eventually have to pay back plus interest)
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