Chapter 18 Flashcards
A computer file for maintaining a record for each vendor of individual acquisitions, cash disbursements, acquisition returns and allowances, and vendor balances
Accounts Payable Master File
A listing of the amount owed to each vendor at a point in time; prepared directly from the accounts payable and vendor balances
Accounts Payable Trial Balance
The transaction cycle that includes the acquisition of and payment for goods and services from supplier outside the organization
Acquisition and Payment Cylce
A journal or listing generated from the acquisitions transaction file and typically includes information such as vendor name, date, amount, and account classification for each transaction
Acquisitions Journal
Tests to determine whether transactions recorded a few days before and after the balance sheet date are included in the correct period
Cutoff Tests
A document indicating a reduction in the amount owed to a vendor because of returned goods or an allowance granted
Debit Memo
Shipping contract in which title to the goods passes to the buyer when the goods are received
FOB Destination
Shipping contract in which title to the goods passes to the buyer at the time that the goods are shipped
FOB Origin
A document prepared or electronically issued by the purchasing department indicating the description, quantity, and related information for goods and services that the company intends to purchase
Purchase Order
Request by an authorized employee to the purchasing department to place an order for inventory and other items used by an entity
Purchase Requisition
A document prepared by the receiving department at the time tangible goods are received, indicating the description of the goods, the quantity received, the date received, and other relevant data; it is part of the documentation necessary for payment to be made
Receiving Report
A document or record that specifies the details of an acquisition transaction and amount of money owed to the vendor for an acquaition
Vendor’s Invoice
A statement prepared monthly by the vendor, which indicates the customer’s beginning balance , acquisitions, payments, and ending balance
Vendor’s Statement
A document used to establish a formal means of recording and controlling acquisitions, primarily by enabling each acquisition transaction to be sequentially numbered
Voucher
Three classes of transactions included in the acquisitions and payment cycle:
1) Acquisitions of goods and services
2) Cash disbursements
3) Purchase returns and allowances and purchase discounts
The ten Accounts involved in the acquisitions and payment cycle:
1) Accounts Payable
2) Cash in bank
3) Purchase returns and allowances
4) Purchase Discounts
5) Manufacturing expense control account
6) Selling expense control account
7) Raw Material Purchases
8) Property, Pant and Equipment
9) Prepaid expenses
10) Administrative expense control account
Accounts for Acquisitions class of transactions
Inventory and prepaid expenses
Business Functions for the Acquisitions class of transactions
Processing purchase orders
Document and records for Acquisitions class of transactions
Purchase requisition and purchase orders
Accounts for Cash Disbursements class of transactions
Cash in Bank and Accounts Payable
Business Functions for Cash Disbursements class of transactions
Processing and recording cash disbursements
Documents and records for Cash Disbursements class of transactions
Cash disbursement journal or listing
The proper recognition of the liability for the receipt of goods and services requires BLANK
Prompt and accurate recordings
Vendors invoice
indicates the amount recorded in the acquisition file
Documents associated with the disbursement process that auditors examine include:
Check, cash disbursement transaction file, and cash disbursement journal or listing
Test of controls and substantive tests of transactions for the acquisition and payment cycle are divided into two broad categories:
1) Tests of acquisitions which include: processing purchase orders, receiving goods and services, and recognizing liability
2) Test of payments which includes processing and recording cash disbursements
To prevent theft or misuse
Goods should be physically controlled from the time of their receipt until their use or disposal
Personnel who record acquisitions should not
Have access to cash, marketable securities, and other assets
The most important controls over cash disbursements include:
1) The signing of checks by an individual with proper authority
2) Separation of responsibilities for signing checks and performing the accounts payable function
3) Careful examination of supporting documents by the check signer at the time the check is signed
Key internal controls for occurrence transaction-related audit objectives for cash disbursements
Approval of payment on supporting documents is given at the time checks are signed
Common tests of controls for occurrence transaction-related audit objectives for cash disbursements
Examine indication of approval
Common Substantive Tests of transactions for occurrence transaction-related audit objectives for cash disbursements
Examine supporting documents as part of the tests of acquisitions
Key Internal controls for completeness transaction-related audit objectives for cash disbursements
Checks are prenumbered and accounted for
