Chapter 7 & 8 Review

Question 1

What makes up the Fraud Triangle

Answer 1

Opportunity
Financial Pressures
Rationalization

Question 2

SOX act

Answer 2

Maintains Internal Control and safeguards assets accuracy and reliability.

Question 3

Petty Cash

Answer 3

Only debit when establishing a fund.

Question 4

5 Primary Components of Assessing Fraud

Answer 4

1. Control Environment
2. Risk Assessments
3. Control Activities
4. Information and Communication
5. Monitoring

Question 5

Bank Statement Items

Answer 5

Per Bank Statement
——————————
\+ deposit in transit 
- outstanding checks
\+\- bank errors 
——————————
correct balance

Question 6

Adjusting book balance

Answer 6

Per Books
——————
\+ EFT collectibles 
- NSF (bounced) checks
- service charges and other payments
\+/- company errors 
—————— Correct balance

Question 7

3 Types of Receivables

Answer 7

Accounts, Notes, Other Receivables

— other receivables deal w taxes, loans

Question 8

Direct Write-Off Method

Answer 8

Receivable not stated at net receivable value, not accepted for financial reporting, no matching.

Question 9

Allowance Method

Answer 9

Better matching, receivable stated at net revivable value. Required by GAAP.

Question 10

Account Receivable Turnover

Average Collection Period

Answer 10

Net Credit Sales
————————
Average Net Account Receivable

365 / accounts receivables turnover

Question 11

Journal entry: Sale on Account

Answer 11

AR

SALES REVENUE

Question 12

Journal entry: Sales Return

Answer 12

SALES RETURN AND ALLOWANCE

AR

Question 13

Journal entry: Collection or AR

Answer 13

Cash

AR

Question 14

Journal entry: Write- Offs

Answer 14

Allowance for Doubtful Accounts

AR

Question 15

Journal entry: Recovery of Write Offs

Answer 15

-AR
ALLOWANCE FOR DOUBTFUL
-CASH
AR