ACCT_3444_L10_Ch_18_and_19

ACCT_3444_L10_Ch_18_ - e of raw materials t of manufacturing overhead costs tory gement ss asing ss goods Accounting 3444 Lecture 10 Chapters 18

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se of raw materials nt of manufacturing overhead costs ntory agement ess hasing ess goods oll ess ment of direct and indirect labour costs Accounting 3444 Lecture 10: Chapters 18 and 19– Application of the Auditing Process- Purchasing Cycle and Inventory Lecture 9 Recap: Key Concepts: Definition of Cash/ types of cash accounts Key to audit the year- end cash balance is the Bank Reconciliation Auditor should keep in mind the high risk of fraud over cash Key functions and documents of the Payroll Cycle Common Controls over the Payroll Cycle Common analytical Procedures] Using a Service Organization Chapter 16 and 17 In Class Wrap Up Exercises Chapter 16: Problems 16-21 Chapter 17: Problems, 17-27 Chapter 18– The Purchasing Process Liabilities are obligations arising from past transactions, the settlement of which involves the transfer or use of assets, provision of services, or yielding economic benefit in the future Expenses Expenses are decreases in economic resources either by way of outflow or reduction of assets or incurrence of liabilities, resulting from an entity’s ordinary course of business. Expenses should be recognized when: 1. The expense matches directly with the recognized revenue i.e. cost of goods sold. 2. The expense is recognized in the period the cash is spent and not related to specific transactions i.e. period costs of rent 3. The expense is allocated on a rational and systematic procedure i.e. amortization. 1
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1. Sale of goods and services for cash/credit 2. Payment of liabilities arising from the purchase of goods or services 3. The return of goods to suppliers for cash or credit Basic Activities: 1. Purchasing goods and services 2. Paying the bills 3. Return of goods for cash/ credit Key Accounts Affected: PURCHASE TRANSACTION Trade A/P Inventory Purchases/ COGS Various asset and expense accounts CASH DISBURSEMENT TRANSACTION Cash Trade A/P Cash Discounts Various asset and expense accounts PURCHASE RETURN TRANSACTIONS Purchase returns Purchase allowances Trade A/P Various asset and expense accounts Functions in the Purchasing Process 1. Requisition- the need for goods/ services is identified and a request to purchase is made by an authorized employee to the purchasing department o Doc: Purchase Requisition- a written request for goods. 2. Purchasing- Purchases are coordinated through the purchasing department to ensure goods are acquired in the right quantities at the lowest possible prices. Each company should have a policy, which requires different levels of authorization for different dollar values of purchases (higher dollar purchases should require higher level of approval). 2
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This note was uploaded on 07/13/2011 for the course ACCT 1110 taught by Professor Bleecker,d during the Spring '11 term at Kwantlen Polytechnic University.

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ACCT_3444_L10_Ch_18_ - e of raw materials t of manufacturing overhead costs tory gement ss asing ss goods Accounting 3444 Lecture 10 Chapters 18

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