Chapter 6 Summary

Chapter 6 Summary - Chapter 6 1) Distinguish service,...

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Chapter 6 1) Distinguish service, merchandising, and manufacturing operations, and describes the purpose of internal control a) Service companies sell services rather than physical goods; consequently, their income statements show costs of services rather than cost of goods sold. b) Merchandise companies sell goods that have been obtained from a supplier. Retail merchandise companies sell direct to consumers whereas wholesales merchandise companies sell to retail companies. c) Manufacturing companies sell goods that they have made themselves d) Internal controls are used to protect (against theft and fraudulent financial reporting) and to serve (by promoting efficient and effective operations and by alerting company officials to possible violations of laws and regulations). 2) Perform a key cash by reconciling to bank statements a) The bank reconciliation requires determining two categories of items: (1) those that have been recorded in the company’s books but not in the bank’s statement of account and (2) those that have been reported in the bank’s statement of account but not in the company’s books. The second category f items provides the data needed to adjust the Cash records to the balance reported on the balance sheet. 3) Explain the use of a perpetual inventory systems as a control. a) Perpetual inventory systems protect against undetectable theft they provide an up- to-date record to inventory that should be on hand at any given time, which can be compared to a count of the physical quantity that actually is on hand. b)
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Chapter 6 Summary - Chapter 6 1) Distinguish service,...

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