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18 Cards in this Set

  • Front
  • Back

Merchandise inventory include:

all goods that a company owns and holds for sale, regardless of where the goods are located when inventory is counted

The 3 inventory items:

-goods in transit


-goods on cosignment


-goods damaged or obsolete

The understatement of the ending inventory balance cause:

the cost of goods to be overstated and the net income to be understated

What is the purpose of internal control?

Managers use policies and procedures to;


-Protect assets


-ensure reliable accounting


-promote efficient operations


-urge adherence to company policies

What are the principles of internal control?

-establish responsibilities/dividing tasks


-maintain adequate records


-insure assets and bond key employees


-separate recordkeeping from custody of assets


-divide responsibility for related trasnactions


-apply technological controls


-perform regular and independent reviews

Define: Cash

Currency, coins, amounts of deposit in bank accounts, checking accounts, and many savings accounts.


-Also includes items such as customer checks, cashier's checks, certified checks, and money orders

Define: Cash Equivalents

Short-term, highly liquid investments that are:


(1) Readily convertible to a known cash amount


(2) Close to maturity (due) date and not sensitive to interest rate changes

What is the purpose of the voucher system?

A voucher system establishes procedures for:


-verifying, approving, and recording obligations for eventual cash disbursements


-issuing checks for payment of verified approved, and recorded obligations.

The process of the voucher system

Sender-->Voucher-->Receiver


Cashier-->Check-->Supplier


Accounting-->Invoice Approval-->Cashier


Receiving-->Receiving Report-->Accounting


Supplier-->Invoice-->Accounting


Purchasing-->Purchase Order-->Supplier


Requesting-->Purchase Requisition-->Purchasing

What is the petty cash system?

Small payments required in most companies for items such as postage, courier fees, minor repairs, and low-cost supplies.


-from company cashier--> to petty cashier

What is a petty cash fund?

a petty cash fund is used only for business expenses.


-petty cash receipts with either no signature or a forged signature usually indicate misuse of petty cash.

What is the purpose of Bank Reconciliation?

A bank reconciliation is prepared regularly to explain the difference between cash reported on the bank statement and the cash balance on company's books.

Lump Sum Asset Purchases

The total cost of a combined purchase of land and building is separated on the basis of their relative market value.

Depreciation

Depreciation is the process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use.

Disposals of Plant Assets

If Cash received > Book Value, record a gain(credit)


If Cash received < Book Value, record a loss(debit)


If cash received = Book Value, no gain or loss

Intangible Assets

-Assets not physical in nature


-Useful life is often difficult to determine


-Often provide exclusive rights or privileges


-Usually acquired for operational use

Examples of Intangible Assets

-patents, copyrights, leaseholds, leasehold improvements, franchises & licenses, goodwill, trademarks & trade names

Patents

The exclusive right granted to its owner to manufacture and sell a patented item or use a process for 20 years.


-A patent's cost is generally amortized, using the straight-line method, over its useful life, not to exceed 20 years.