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12 Cards in this Set
- Front
- Back
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3 Types of Expense Categories |
Product cost, period cost, systematic allocation |
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Product cost - Define + example |
Can be matched directly with specific transactions/ events, recognized upon recognition of related revenue |
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Period cost - Define + example |
Recognized in the period cash is spent or liability is incurred for goods or services used at the that time; not directly related to other transactions, no future benefit |
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Systematic allocation - Define + Example |
expense allocated in systematic process to periods in which related assets are expected to provide benefits FUTURE BENEFIT |
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3 types of purchasing processes |
Purchase Transactions Cash disbursement transactions Purchase return transactions |
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Purchase transaction accounts |
Accounts payable, inventory, purchases or COGS, Various assets and expense accounts |
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Cash disbursement transaction Accounts |
Cash, A/P, Cash discount, various asset and expense accounts |
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Purchase return transactions Accounts |
Purchase returns, purchase allowance, A/P, Various asset and expense account. |
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Major Functions of the purchasing process and related key documents (6 items) |
Requisitioning, Purchasing, receiving, Invoice processing, disbursements, accounts payable, general ledger |
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Primary concerns when auditing A/P and accrued expenses (3 concerns) |
Exaggerates the financial strength of company.
Conceals fraud as effectively as overstatement of assets. Accompanied by understatement of expenses and overstatement of net income |
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A/P confirmations test for (assertion) |
Completeness |
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Why use less A/P confirmations, than A/R? |
The auditor has other third party source documents to rely on, such as vendor invoices, vendor statements, and payments made by the entity. |
