Mgt 254 Test 2

Front 1

Internal Contols

Back 1

policies/procedures to provide assurance that enterprise objectives are accomplished

Front 2

Two types of Internal Controls

Back 2

Accounting and Administrative Controls

Front 3

Administrative Controls

Back 3

controls for evaluating the performance and assessing compliance with the company policies and public laws

Front 4

Accounting Controls

Back 4

designed by safeguard company assets and ensure reliable accounting records

Front 5

9 Key Features of Internal Controls

Back 5

1. Separation of Duties

2. Quality of Employees

3. Bonded Employees

4. Required Absences

5. Performance Evaluations

6. Procedures manual

7. Authority and Responsibility

8. Renumbered Documents

9. Physical Control

Front 6

What does it mean to Safeguard company assets?

Back 6

Accounting control to protect assets from losing money, stealing and fraud

Front 7

Fidelity Bond

Back 7

provides insurance that protects a company from loss caused by employee dishonesty

Front 8

Separation of Duties

Back 8

when duties are separated, work of one employee can act as a check on the work of another employee, likelihood of fraud of theft is greatly reduced

Front 9

What are 2 procedures that help protect against cash receipts?

Back 9

proof of purchase, return it

cash paired is properly recorded

Front 10

What are 2 procedures that help protect against cash disbursements?

Back 10

pay with checks

balance cash in checkbooks (record everything )

Front 11

Debit Memo

Back 11

bank has reduced balance on bank statement because of checking accounting is liability

Front 12

Credit Memo

Back 12

bank has increased the balance in your bank accounting

example: interest

Front 13

NSF Check

Back 13

(non-sufficient funds)

customer sends check to payments, deposit in our bank and gets taken out of customers bank but not enough funds to pay deposited (bounced back)

Front 14

Deposit in Transit

Back 14

cash that a company has received and tis rightfully reports as Cash on its balance sheet but does not appear on bank statement until later date

Front 15

Outstanding Check

Back 15

check we wrote, reduced balance for books but it has yet to clear our bank (bank hasn't cashed them yet)

Front 16

Cash short and over

Back 16

when using a cash register employees sometimes make mistakes in collecting cash or making change for customers. If the cash register doesn't reconcile by small amount at the end of the day, we use this account to force the balance

Front 17

when an account is short, this means...

Back 17

it was recorded as an expense

Front 18

when a account is over, this means...

Back 18

it is recorded as credit or income

Front 19

Petty Cash

Back 19

used to make small expenditures that cannot wait for the formal check (writing process)

operated on a imprest basis

excellent internal control

Front 20

imprest BASIS

Back 20

means that when the fund gets low on cash it is replenished

Front 21

imprest FUND

Back 21

anytime management wants to count fund there should be cash and recipes that equal the fund value

Front 22

when are the only times to use the petty cash fund?

Back 22

1. when established the fund

2. when increasing the fund

3. when decreases the fund

Front 23

What are the 4 types of audit options?

Back 23

1. qualified

2. unqualified

3. adverse

4. disclaimer

Front 24

what is the best audit opinion you can get?

Back 24

UNQUAILIFED

Front 25

What is the purpose of an Audit?

Back 25

to guarantee that financial statements are materially correct

Front 26

what are auditors responsible for?

Back 26

they are responsible for an opinion of the financial stamens based on audit

Front 27

What does the petty cash custodian do?

Back 27

They are responsible for the cash in the fund or that organization

Front 28

What is management's responsibility for audits?

Back 28

they are responsible for the preparation and fair presentation of financial statement

Front 29

Security and Exchange Commission (SEC)

Back 29

a government agency authorized to establish and enforce the accounting rules for public complies

Front 30

uncollectible accounting expense

Back 30

when you (service revenue)*(% estimate of Uncollectible account) is commonly called % of revenue method of estimating uncollectible accounts expense

Front 31

Allowance for doubtful accounts

Back 31

an account where the company estimates a amount that they wont get paid from their customers

Front 32

What is the effect of write off under the allowance method?

Back 32

no effect

Front 33

How do you find the Net Realizable Value?

Back 33

Accounts receivable - Allowance for Doubtful Accounts

Front 34

What is Net Realizable Value?

Back 34

the amount expected to be collected from accounts receivable; face amount of receivables less than allow for estimated uncollectible amounts

Front 35

What are the advantages of credit cards?

Back 35

1. seller avoids doing credit checks

2. seller receives payment from credit card company

3. increases sales

4. credit card company assumes cost of slow collections and write offs

Front 36

What are the disadvantages of credit cards?

Back 36

FEES

Front 37

How do you find Accounts Receivable Turnover?

Back 37

sales/accounts receivable

Front 38

What does the Account Receivable Turnover give you / tell you?

Back 38

tells how many times during the year on average accounts receivable is collected (converted to cash )

Front 39

What does it mean if it takes a longer time to collect accounts receivable? (vise versa)

Back 39

the greater opportunity cost of lost income

Front 40

Accounts receivable

Back 40

when a company allows a customer to "buy now and pay later", the company's right to collect later

Front 41

Notes Receivable

Back 41

longer credit term needed or when receivable is large, company requires the customer issue a note that specifies interest and other credit terms

Front 42

Operating cycle

Back 42

days sales in inventory plus the days sales in accounting receivable

1. Cash

2. Purchase

3. Inventory

5. Sell

6. Accounting Receivable

7. Collect

Front 43

How to find Average days of collect accounts receivable?

Back 43

365/ accounts receivable turnover

Front 44

What does the average days to collect accounts receivable?

Back 44

this ratio tells the user how many days on average it takes a company to collect its account receivable

Front 45

product cost (inventory cost)

Back 45

cost that is included in inventory and associated with goods

example : cost to make the product itself

Front 46

period cost

Back 46

cost that are not included in inventory; all cost expect product costs

examples: selling and administrative costs, rent, operating costs, office supplies

Front 47

How do you fin the cost of good available for sale?

Back 47

Merchandise inventory + Cost of goods sold

Front 48

Merchandise inventory

Back 48

the goods purchased for resale

Front 49

cost of goods sold

Back 49

an expense account, cost incurred from making a profit

Front 50

FOB shipping point

Back 50

a type of transportation costs, where the buyers pays for a product to be shipped (merchandise inventory )

Front 51

FOB Destination

Back 51

a type of transportation out, seller pays for transportation out

Front 52

Common Size Financial Statements

Back 52

taking balance sheet and absolute dollar amounts and converting them to percentages of total assets. Used to do horizontal analysis and to compare companies of the same industry but different sizes.

Front 53

Credit terms

Back 53

used to show cash discounts which company used to give more incentive to buy

Front 54

2/10, n/30

Back 54

2% discount in 10 days

full amount due (n) in the number of days, the full amount is due

Front 55

How do you find the Net income percentage (aka return on sales, sales ratio) ?

Back 55

({Net income} / {Sales Revenue}) * 100

Front 56

What is the Net Income Percentage?

Back 56

net income expressed as percentage of sales proves insight as to how much of each sales dollar is left as net income after all expenses are paid; all about controlling the costs

Front 57

What does that mean if a company has a higher return on sales percentage?

Back 57

that means they are doing a better job of controlling the costs

Front 58

How do you find the Gross margin percentage?

Back 58

(Gross Margin/Sales) * 100

Front 59

How do you find the gross margin?

Back 59

sales revenue - cost of good sold

Front 60

What is gross margin?

Back 60

measures each sales dollar after cost of goods sold is deducted to cover expenses and provide a profit

Front 61

If a company has a higher gross margin percentage...

Back 61

its pricing its products higher

Front 62

Perpetual inventory system

Back 62

inventory account is adjusted perpetually (continually) thought the accounting period

Front 63

periodic inventory system

Back 63

account that is adjusted periodically

Front 64

why is it a huge disadvantage to use the periodic inventory system?

Back 64

no way to account for damage, lost and stolen inventory

Front 65

gains

Back 65

are increases in assets or decreases in liabilities which result from peripheral/incidental transactions

Front 66

Losses

Back 66

decreases in assets or increases in liabilities which result from peripheral or incidental transactions

Front 67

LIFO (last in, first out)

Back 67

cost flow method that requires that the cost of the item purchased last be assigned to cost of goods sold (beginning inventory - ending inventory)

Front 68

FIFO (First in, first out)

Back 68

cost flow method requires the cost of the time purchased first to be assignment to cost of goods sold (purchases - ending inventory)

Front 69

During rising prices is cost of good sold higher or lower?

Back 69

higher

Front 70

Lost of Cost of Market (LCM)

Back 70

when inventory must be reported at power of cost or market; happens when market value decreases the original prices

Front 71

What is Inventory Turnover?

Back 71

this measures how quickly a company sells its merchandise inventory

Front 72

How do you we find Inventory turnover?

Back 72

cost of good sold / inventory

Front 73

What is Number of days to sell inventory?

Back 73

this measures how quickly a company sells its merchandise inventory

Front 74

How do you we find number of days to sell inventory?

Back 74

365/Inventory Turnover

Front 75

What does that mean if you have a lower average of number of days to sell inventory ? (vise versa)

Back 75

company with the lower average number of day to sell is doing better!