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Accounting ch5-8 > Ch 5-8 terms and formulas > Flashcards

Ch 5-8 terms and formulas Flashcards

1
Q

an attempt to deceive others for personal gain

A

fraud

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2
Q

Terms of a loan agreement that if broken, entitle the lender or force repayment

A

loan covenants

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3
Q

Actions taken to promote efficient and effective operations, protect assets, enhance accounting info, and adhere to laws and regulations

A

internal control

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4
Q

assign each task to one employee

A

establish responsibility

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5
Q

do not make one employee responsible for all parts of a process

A

segregate duties

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6
Q

do not provide access to assets or info unless it is needed to fulfill assigned responsibilities

A

restrict access

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7
Q

prepare documents to show activities that have occured

A

document process

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8
Q

check other’s work

A

independently verify

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9
Q

A process for approving and documenting all purchases and payment on account

A

Voucher system

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10
Q

A process that controls the amount paid to others by limiting the total amount of money available for making payments to others

A

Imprest system

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11
Q

And internal report prepared to verify the accuracy of both the bank statement and the cash accounts of a business or individual

A

Bank reconciliation

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12
Q

Money or any instrument that banks will except for deposit and immediately credit to a company’s account

A

Cash

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13
Q

Short term, high liquid investments purchased within three months of maturity

A

Cash equivalents

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14
Q

Not available for general use but rather restricted for a specific person

A

Restricted cash

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15
Q

Assets acquired for resell to customers

A

Inventory

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16
Q

Cost of the goods sold formula

A

Beginning inventory plus purchases minus ending inventory

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17
Q

Ending inventory formula

A

Beginning inventory plus purchases minus cost of goods

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18
Q

Inventory records are updated periodically, at the end of the accounting period. To determine how much merchandise has been sold, periodic systems require that inventory be physically counted at the end of the period.

A

Periodic inventory system

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19
Q

Inventory records are updated perpetually, every time inventory is bought, sold, or returned.

A

Perpetual inventory system

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20
Q

The cost of inventory lost to theft, fraud, and error

A

Shrinkage

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21
Q

A term of sale indicating that goods are owned by the buyer the moment they leave the sellers premises.

A

FOB shipping point

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22
Q

A term of sale indicating that goods are owned by the seller until they are delivered to the buyer.

A

FOB destination

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23
Q

A reduction in the cost of inventory purchases associated with unsatisfactory goods

A

Purchase returns and allowances

24
Q

A cash discount received for prompt payment of a purchase on account.

A

Purchase discount

25
Q

Refunds and price reduction’s given to customers after goods have been sold and found unsatisfactory

A

Sales returns and allowances

26
Q

A sales price reduction given to customers for prompt payment of their account balance

A

Sales discount

27
Q

Present important subtitles, such as gross profit, to help distinguish core operating results from other, less significant items that affect net income

A

Multistep income statement

28
Q

Gross profit formula

A

Net sales minus cost of good sold.

29
Q

Gross profit is a – – –, not an account

A

Subtotal

30
Q

A ratio indicating the percentage of profit earn on each dollar of sales, after considering the cost of product sold

A

Gross profit percentage

31
Q

The inventory costing method that identifies the cost of the specific item that was sold

A

Specific identification

32
Q

Assumes that the costs of the first goods purchased are the costs of the first goods sold

A

First in, first out. FIFO

33
Q

Assumes that the costs of the last goods purchased are the costs of the first goods sold

A

Last in, first out. LIFO

34
Q

I know inventory costing assumption that uses the weighted average unit cost of the goods available for sell for both cost of goods sold and ending inventory

A

Weighted average cost

35
Q

A valuation rule that requires inventory to be written down when it’s market value falls below its cost

A

Lower of cost or market

36
Q

The process of buying and selling inventory

A

Inventory turnover

37
Q

A measure of the average number of days from the time inventory is bought two the time it is sold

A

Days to sell

38
Q

Inventory turnover ratio formula

A

Cost of goods sold/average inventory

39
Q

Days to sell formula

A

365/inventory turnover ratio

40
Q

A promise that requires another party to pay the business according to a written agreement

A

Note receivable

41
Q

Amounts owed it to a business by its customers

A

Accounts receivable

42
Q

A method of accounting that reduces accounts receivable for an estimate of uncollectible accounts

A

Allowance method

43
Q

Reports that estimated amounts of this. His credit sales that customers will fail to pay

A

Bad debt expense

44
Q

The act of removing and uncollectible account and its corresponding allowance from the accounting records

A

Write off

45
Q

Estimates bad that based on the historical percentage of sales that lead to bad that losses

A

Percentage of credit sales method

46
Q

Estimates uncollectible accounts based on the age of each account receivable

A

Aging of accounts receivable method

47
Q

Estimated uncollectible percentage for 0 to 30 days

A

1%

48
Q

Estimated uncollectible percentage for 31 to 60 days

A

10%

49
Q

Estimated uncollectible percentage for 61 to 90 days

A

20%

50
Q

Estimated uncollectible percentage for over 90 days

A

40%

51
Q

Interest formula

A

Principal times interest rate times time

52
Q

The process of selling and collecting on account. determines the average number of times this process occurs during the period.

A

Receivables turnover

53
Q

A measure of the average number of days from the time a sale is made on account to the time it is collected

A

Days to collect

54
Q

Receivables turnover ratio

A

Net sales revenue/average net receivables

55
Q

Days to collect formula

A

365/receivables turnover ratio

56
Q

And arrangement where receivables are sold to another company for immediate cash

A

Factoring

57
Q

A non-GAAP alternative to the allowance method of accounting for uncollectible accounts

A

Direct write off method

Accounting ch5-8 (5 decks)

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