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24 Cards in this Set
- Front
- Back
internal control system
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policies and procedures use to:
protect assets ensure reliable acct promote efficient operations urge adherence to company policies |
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Principles of internal control
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1) establish responsibilities
2) maintain adequate records 3) insure assets and bond key employees 4) separate record keeping from custody of assets 5) Divide responsibility for related transactions 6) apply technological controls 7) Perform regular and independent reviews |
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Liquidity
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company's ability to pay for its near-term obligations
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Cash over and Short
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an income statement account recording the income effects of cash overages and cash shortages
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Petty cash
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part of an imprest system which designates advance money ti establish the fund, to withdraw from the fund, and to reimburse the fund.
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Bank statement
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shows the activity in the account. Includes the following information:
1) beginning of period balance 2) checks and other debits decreasing the account during the period 3) Deposits and other credits increasing the account during the period 4) End of period balance of the depositor's account |
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canceled checks
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checks the bank has paid and deducted from the customers account during the period
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Bank reconciliation
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a report explaining any differences between the checking account balance according to the depositors records and the balance reported on the bank statement
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outstanding checks
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checks written or drawn by the depositor, deducted on the depositors records, and sent to the payees but not yet received by the bank for payment at the banks statement date
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deposits in transit
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deposits made and recorded by the depositor but not yet recorded on the bank statement
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Day's sales uncollected
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accounts receivable/net sales X 365
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Bad debts account
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a company expects that some customers will not pay what they promised
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Direct write-off method
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records the loss from a bad debts account receivable when it is determined to be uncontrollable
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Matching principle
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requires expenses to be reported in the same accounting period as the sales they helped to produce
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allowance method
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matches the estimated loss from uncollectible accounts receivable against the sales they helped produce
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Allowance for doubtful accounts
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Contra asset account (instead of reducing accounts receivable directly)
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Interest formula
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principle of the note x annual interest rate x time expressed in years (#/360)=interest
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Accounts receivable turnover
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net sales/avg accounts receivable
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depreciation
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process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use
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salvage value ( also called residual value or scrap value)
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an estimate of the assets value at the end of its benefit period
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Useful life (service life)
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the length of time it is productively used in a company's operations. Might not be as long as the assets total productive life.
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straight line depreciation
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charges the same amount of expense to each period of the assets useful life
cost-salvage value/useful life in periods |
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Units-of-production depreciation
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charges a varying amount to expense for each period of an assets useful life depending on its usage.
steps: 1) dep. per unit= cost-salvage value/total units of production 2)dep. expense=dep. per unit x units produced in period |
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Double-declining balance method
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1) compute the assets straight line depreciation rate
2) double the straight-line rate 3) compute depreciation expense by multiplying this rate by the assets beginning of period book value |