Exam #2 study guide Flashcards
what items are in the bank section of a bank reconcilliation
deposits in transit are added to bank statement balance
outstanding checks are deducted from bank statement balance
what items are in the book section of a bank reconcilliation
collection of notes receivable and interest revenue are added to book balance
bank service charge and NSF checks are deducted from book balance
what type of account is accounts receivable
current asset
What does account Allowance for uncollectible accounts represent?
the amount of accounts receivable that a company does not expect to collect
Calculation of interest on Notes Receivable
Amount of note receivable x Annual interest rate X #of months/12 = amount of interest
what does cost of inventory include
Purchase price minus discount taken for early payment – returns – allowances + shipping (freight) cost paid by buyer
3 reasons management might use FIFO versus LIFO methods are
tax effects
income statement effect
balance sheet effects
what happens when the shipping cost is paid by the buyer / seller
buyer: mechandise inventory account increases
seller: it is included in operating expense
calculation of net sales
sales - sales returns&allowances - sales discounts
gross profit
(Sales – sales returns & allowances – sales discounts) – Cost of Goods Sold
gross profit %
Gross profit ÷ Net sales
4 financial statement in order of their preperation and what they include
income statement -> revenue - expenses = net income/loss
statement of change of shareholder´s equity -> beg. retained earning + net income - dividends = ending retained earning + beginning common stock + additional contribution from owner = Total shareholder equity
balance sheet -> assets = liabilities + common stock + ending retained earning
statement of cash flow -> inflow and outflow of cash operated in operating, investing, and financing activites
