Accounting Test 3 Flashcards

Terms Definitions
revenue
income
Inventory Turnover
COGS/Average Inventory
Event
A happening of consequence.
Accounting
Planning, recording, analyzing, and interpreting financial information
rent expense
expense, income statement, debit
Account
Subdivision under the three sections of the accounting equation used to summarize increases and decreases in assets, liabilities, and owner's equity.
retained earnings, common stock
equity and credit
Cash-Basis accounting
accounting that records transactions only when cash is received or paid out
REal Estate
FMV based on independent appraisal
fraud
deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.
debit
An ammount recorded on the left side
Variable costing
only variable manufacturing costs are product costs, others are period costs
balance per book
-bank service charge
+collection of note receivable
+collection of interest on note
-NSF check
+/- recording errors
=adjusted book balance
revenues
increase equity and are the assets earned from a company's earnings activities
company's scorecard
balance sheet is known as what?
File Maintenance
The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current
freight in account
an account showing transportation charges for items charged
Referential integrity
regards foreign keys
A foreign key must match an existing value in the master table for the foreign key.
S&A expenses are...
never treated as product costs, regardless of costing method
Consolidated financial statements
financial statements that show all (combined) activities under the parent's control, including those of any subsidiaries
if we are over
Credit: cash short and over
$294.00
John Smith is employed at a local funeral home and is paid on an hourly rate of $5.00 per hour. He is also paid time and a half for any hours worked in excess of 40 hours per week. For the current pay period, he worked a total of 60 hours. If his FICA tax is 6%, and his withholding tax is 10%, what is his take-home pay for the week
General Ledger
A ledger that contains all accounts needed to prepare financial statements
Blank Endorsement
An endorsement consisting only of the endorser's signature
penetration test
a type of security testing which involves an authorized attempt by either an internal audit team or external security consulting firm to break into the organization's information system
Periodic inventory system—
updates the accounting records for merchandise transactions only at the end of a period.
sales invoice
provides details of the sale and requests payment
 
when customer is billed, A/R records should update  the sales journal (Dr A/R, Credit Sales)
Income statement
A financial statement that reports the company's revenues and expenses over an interval of time. Pg10
Accrual Basis Accounting
method of accounting in which income is recorded when earned and expenses are recorded when incurred.
Transposition
an error in which the order of the digits us changed such as writing 425, 524 , 245
commission
an amount paid to an employee based on a percentage of the employee's sales.
correcting entry
a journal entry made to correct an error in the ledger
sales budget; sales forecast
1st step in the budgeting process
earnings per share
amount of net income after federal income belonging to a single share of stock
general and administrative expenses
support a company's overall operations and include expenses relating to accounting, human resource management, and financial management
What is the AICPA?
American Institute of Certified Public Accountants - supports the FASB board
a petty cash on hand amount that is less than a recorded amount
Cash Short
cash basis accounting
revenue is recorded only when cash is received, and an expense is recorded only when cash is paid. It does not satisfy generally accepted accounting principles
amount the owner's have invested in the company
definition of owner's equity
Adjusted Trail Balance
A list of accounts and their balances after all adjustments have been made
What do annual reports include?
1) financial statements
2) letter from corporate manager
3) discussion and analysis of recent economic events by mgmt
4) footnotes that explain elements of the fin. statements in more detail
5) report of independent auditors
6) statement of mgmt's resp. for prep of financial statements
7) other corporate info
time period assumption
states that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business
Freight Costs Incurred by Buyer
When the buyer pays the transportation cost of purchasing inventory. As a result the account Merchandise Inventory is increased. 
product costs or inventorial costs
all costs that are incurred in acquiring or manufacturing a product
On a balance sheet, assets are listed in the order of
ease of conversion to cash.
Each Individual Item Seperately
 
To Major Categories of Items
 
To the Entire Inventory 
In what 3 ways can the LCM be applied?
Usually performed by the cashier a treasure function
uses the RA to update the AR master data to reflect the customer's payment and then files the RA in the remittance advice file.
depreciation expense
expense
Sunk Costs
Past/Irrelevant costs
Trucks
Asset, Balance Sheet, Debit
Staff
Human resources, finance, acc, marketing, MIS
budget
detailed statement of estimated receipts and expenditures for a future period of time
Credit
Amount recorded on the right side
Realized
To receive the "act of payment"
restrictive endorsement
An endorsement restricting further transfer of a check's ownership
Fianacial Statement
Business documents that report financial information about a business entity to decision makers.
comparitive statements
a presentation of the financial statements of a company for more than 1 year
overdraft
issuance of a check without sufficient funds in the account when it is presented for payment
service business
offer service- people pay for service
closing entries
Journal entries used to prepare temporary accounts for a new fiscal period
selling expenses
expenses of promoting sales by displaying and advertising merchandise, making sales, and delivering, goods to customers.
Current Ratio
measures a company's short-term debt paying ability.
Bank loans and selling stocks and bonds fall under which of the business activities?
Financing
Authentication
is the process of user identification to ensure that only authorized users are accessing the IT system
 
user ID, password, security tokens, two factor authentication
Note
Written Promise to pay off a liability
Classified Balance Sheet
Groups together similar assets and similar liabilities using a number of standard classifications and sections. Lists current assets, long-term investments, property, plant, & equipment, intangible assets, current liabilities, long-term liabilities, & stockholder's equity.
Process Costing
Costs averaged over large number of identical units
medicare part C
commonly referred to as medicare advantage plans. these plans are run by private companies
moral hazard
the condition that exists when agents have superior info to principals and are able to make decisions that favor their own interest over those of the principals
owner's equity
the amount remaining after the value of all liabilities is subtracted from the value of all assets
Net Loss
Amount by which total expenses exceed total revenue for the accounting period.
Deferred Expense
Cash paid before expense is incurred (prepaid insurance)
After all closing entries have been posted, which of the following accounts is most likely to have a nonzero balance?   
Wages Payable   
Sunbeam Accounting Scandal
-“Cookie jar” reserves to smooth earnings.

-Receivables growing much faster than sales

-Inventories growing much faster than sales.

-Improper bill-and-hold transactions

-Bad debt reserves were significantly decreased.
disburse
to pay out (money), esp. for expenses; expend.
FASB conceptual framework
the set of objectives, principles, and definitions to guide the development of new accounting standards
trial balance
a list of all accounts with their balances to provide a check on the equality of the debits and credits
deferred charges
the assets that result when a company prepays expenses that produce long-term benefits
Accounts Payable
Money we owe to the supplier for goods
Contra Asset Account
Account used to reduce the reported value of the asset to which it relates. Example: Fixed assets and accumulated depreciation
Balance Sheet Presentation –
GAAP balance sheets report current items first, with assets listed from most liquid to least liquid and liabilities are listed from nearest to maturity to furthest from maturity. IFRS balance sheets present noncurrent items first but this is not a requirement. Notes
CM per unit=CM%=
=Sales Revenue per unit - Variable cost per unit=CM per unit / Sales Revenue per unit
flexible budget
estimates what costs should be for any level of activity within a specified range; prepared for the same activity level as actually achieved
special journal
a journal used to record only one kind of transaction
imaged checks
a copy of the canceled check. it is send with the statement instead of the original check
intrusion prevention systems (IPS)
new type of filtering designed to identify and drop packets that are part of an attack; this method drops packets that show a an attack pattern or do not fit a typical packet profile
Generally Accepted Auditing Standards #2
The auditor must maintain independence in mental attitude in all matters relating to the audit.
balance sheet
a tabular statement of both sides of a set of accounts in which the debit and credit balances add up as equal.
petty cash slip
a form showing proof of a petty cash payment
Facotry Labor Costs (Assigning to Overhead)
Factory Labor Debit Factory Wages Payable Credit
Receiving cash from a customer on account will
have no effect on total assets
What are alternative names for balance sheet?
statement of financial position or statement of financial condition
What is a chart of accounts?
a numbered or coded list of all account titles (used as references in the Post Ref. column of the journal)
How do you compute Days' Sales in Revievables Ratio?
Accounts Recievable / Net sales X 365
to determine
ermitteln
T account
basic account form
finance does what?
manages money
partner
Each member of a partnership.
return on Assets
company's profitabilitynet income/total assets
Account Balance
The amount in an account
notice
the organizations should have policies and practices to maintain privacy of customer data
Contribution Margin Ratio
Total Contribution Margin/Total Sales
Return on Equity (Formula--> Dupont Analysis)
loss
Businesses that spend more money than they are earned
Business Entity
exists independently of its owner's personal holdings
Accounting equation
Assets = Liabilities + Owner's Equity
account number
the number assinged to an account
conversion cost
Direct labor cost plus manufacturing overhead cost.
Expense
A decrease in owner's equity resulting from the operation of a business
Preferred stock
An ownership interest in a coporatioin with special privileges or preferences as to liquidation and dividends. Upon liquidation, they are paid before common stockholders and entitled to receive dividends before common stockholders. In exchange, give up right to vote, dividends limited to set amount.
planning
selecting a course of action and developing implementation strategy along with budgets
Temporary capital accounts
The revenue, expense, and withdrawals accounts are examples of these.
Accounting system
is designed to collect, document, and report on financial transactions affecting the business
Journal
A book of original entry in which business transactions are recorded in chronological order
proving cash
determining that the amount of cash agrees with the balance of the cash account in the accounting records
credit terms
include the amounts and timing of payments from a buyer and seller. usually reflect an industries practices
period costs
Costs not directly related to a product, service, or asset. These costs are charged as expenses to the income statement in the period in which they are incurred.
Leasehold
A right to occupy land or buildings under a long-term rental contract
Types of investment pools:
1.internal investment pool, 2. external investment pool
The values of future dollars must be ____ before they can be compared to current dollars.
adjusted
Controlling Account
An account in the general ledger that summariezes accounts in a related subsidiary ledger.
Cash Principle
record assets of cost paid to acquire them, continue to value assets at historical cost until sold, more objective than market cost.
Maturity Date
The date on which a promissory note must be paid
What is Management Accounting concerned with?
providing managers with the information they require for the day to day running of the business.
trade discount
a reduction in the list price granted to customers
margin of safety
total budgeted or current sales - break even sales
___on sales is the amount of profit made during the period before expenses are deducted
gross profit
FIFO Method
First in, first out. Assumes that the earliest goods purchased are the first to be sold.
equity capital
that portion of the capital of a business provided by the sale of stock.
Profit volume analysis
version of CVP analysis using a single profit line
limited liability company
company in which each member is only liable for his or her own actions or those under his or her control
Generally Accepted Accounting Principles (GAAP)
common standards that indicate how to report economic events.
2/10, n/30
2 = discount percentage10 = # of days in discount periodn = Net (total sales minus returns)30 = maximum credit period
Single Step Income Statement
an income statement that lists all the revenues together under a heading such as revenues or revenues and gains. Expenses appear in a separate category called expenses or perhaps expenses and losses
the portion of each sales dollar that remains after covering variable costs
contribution margin ratio is
What firms are are responsible for auditing?
Securities and Exchange Commision (SEC)
Public company accounting oversight Board (PCAOB)
credit card sale
A sale in which a credit card is used for the total amount of the sale at the time of the transaction.
If the two variables are weakly correlated (lower Correlation Coefficient)...
... the difference will become larger
when the tax payment is made to the federal gov't
Debit: Employee Income Tax Payable Federal
/ 139
Term:
Definition:
Definition:

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