| Terms |
Definitions |
|
Expenses
|
SalariesUtilities
|
|
Physical modeling
|
tangible, constructed
|
|
osteitis
|
inflammation of a bone
|
|
Misappropriation of Assets
|
Pilferage; Embezzlement; Defalcation
|
|
Immediate recognition
|
Selling and administrative expenses
|
|
23. Liabilities
|
economic obligations (debts) payable to an individual or an organization outside the business.
|
|
Labor Rate Variance
|
AH ( AR-SR )
|
|
electroencephalogram
|
record taken electronically of the brain
|
|
Components of Enterprise Management
|
Internal Environment
Objective Setting
Event Identification
-Risk Assessment
Risk Response
Control Activities
Monitoring:
|
|
Junk Bonds
|
Unsecured bonds issued by companies with poor credit ratings (risky).
|
|
Break-Even Point
(in Sales Dollars)
|
Fixed Cost
Contribution Margin Ratio
OR
Fixed Cost
(1-Variable Cost Ratio)
|
|
Throughput Time
|
Process time, inspection time, move time, and queue time
|
|
Management Accounting
|
The branch of accounting concerned with providing management with information to facilitate planning and control.
|
|
The branch of accounting that provides information to people outside the firm
|
Financial accounting
|
|
Partnership
|
2or more ownersaffairs must be kept separatenot a taxable entity for tax purposesUnlimited liability
|
|
H. Rosenblum vs Adler
|
-foreseeable third party approach
-New Jersey Supreme Court rule that auditors should be liable to all reasonable foreseeable third parties who rely on the financial statements
-New Jersey legislature passed the accountants liability statute which limits accountants liability for negligence and effectively overrules Rosenblum
|
|
Equities
|
financial rights to the assets of a business
|
|
number of days in receivables
|
365 ÷ (accounts receivable turnover)
Reflects the number of days that receivables are outstanding. Target average or lower.
|
|
Organizational Independence
|
The chief audit executive's line of reporting within the organization that allows the internal audit function to fulfill its responsibilities free from interferences.
|
|
Who uses accounting information?
|
External and Internal Users.Internal Users-Company Management and Leadership teamsExternal Users-Stockholders and Potential Stockholders, Bondholders, Bankers, and other Creditors, as well as Government Agencies. (also suppliers of raw materials)
|
|
Unit method advantages over group/composite methods
|
Simplifies the computation mathematicallyIdentifies gains and losses on disposalIsolates depreciation on idle equipmentRepresents the best estimate of the depreciation of each asset, not the result of averaging the cost over a longer period of time
|
|
Financial Accounting Standards Board
|
A private organization that establishes generally accepted accounting principles.
|
|
disburse
|
to pay out (money), esp. for expenses; expend.
|
|
horizontal analysis
|
the comparison of the same items on financial statements for two or more accounting periods or dates and the determination of changes from one period or date to the next
|
|
revenues are earned when...
|
the earnings process is substantially complete. For most retail sights, this occurs at the point of sale.
|
|
Percentage of Sales Method
|
A method of estimating the uncollectible accounts from the sales a given period's total net credit sales or net sales.
|
|
Accrual Basis Accounting
|
A system of accounting in which revenues are recognized when earned and expenses when incurred.
|
|
Assets are recorded at the cost to acquire them.
|
Cost Principle
|
|
efficiency variance
|
an estimate of the increase in costs caused by excessive use of labor of materials
|
|
36. Stable monetary unit concept
|
concept that says that accountants assume that the dollar's purchasing power is stable.
|
|
Consumption ratio (of product diversity)
|
Proportion of each activity consumed by a product
|
|
Does goodwill get amortized?
|
No. Unless it's impaired, it remains at historical 'cost' indefinitely.
|
|
37. Statement of cash flows
|
report of cash receipts and cash payments during a period.
|
|
cash flows from financing activities
|
cash flows directly related to the financing of the enterprise itself. involves receipt or payment of money to investors and creditors
|
|
Three Phases of Audit Sampling
|
1. plan the sample
2. select the sample and perform the tests
3. evaluate the results
|
|
How is the removal of old buildings recorded?
|
Removal of old buildings-clearing, grading, and filling-are considered land costs because these costs are necessary to get the land in condition for its intended purpose.
|
|
How are costs incurred after an asset’s acquisition treated?
|
Any related costs incurred after the asset’s acquisition, such as additions, improvements, or replacements, are added to the asset’s cost if they provide future service potential. Otherwise they are expensed immediately.
|
|
What is indicated on the cash flow statement?
|
Effects on an entities cash flow by their operating activities, investing activities, and financing activities of the period.
|
