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MGMT 501 > Test 2 Chap 6-12 > Flashcards

Test 2 Chap 6-12 Flashcards

1
Q

Another name for a cash payments journal when the journal has a column for check numbers

A

Check register

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2
Q

Journal (referred to as book of original entry) in which all vouchers are recorded after they have been approved.

A

Voucher register

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3
Q

Document containing a checklist of steps necessary for approving the recording and payment of an invoice; also called check authorization.

A

Invoice approval

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4
Q

Form used to report that ordered goods were received and to describe their quantity and condition

A

receiving report

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5
Q

Itemized record of goods prepared by the vendor that lists the customer’s name, items sold, sales prices, and terms of sale.

A

Invoice

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6
Q

Document used by the purchasing department to place an order with a seller (vendor)

A

Purchase order

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7
Q

Document listing merchandise needed by a department and requesting it be purchased

A

Purchase requisition

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8
Q

Measure of the liquidity of receivables, computed by dividing the current balance of receivables by the annual credit (or net) sales and then multiplying by 365; also called days’ sales in receivables

A

Days’ sales uncollected

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9
Q

Add interest earned and unrecorded cash receipts
Subtract bank fees and NSF checks
Add or subtract corrections of book errors

A

Book Balance Adjustments

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10
Q

Add deposits in transit
Subtract outstanding checks
Add or subtract corrections of bank errors

A

Bank Balance Adjustments

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11
Q

Checks written and recorded by the depositor but not yet paid by the bank at the bank statement date.

A

Outstanding checks

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12
Q

Deposits recorded by the company but not yet recorded by its bank

A

Deposits in transit

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13
Q

Report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement, for purposes of computing the adjusted cash balance.

A

Bank reconciliation

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14
Q
  • Bank service fees
    -Checks deposited that are uncollectible
    -Corrections of previous errors
    -Withdrawals through ATMS
    -Payments arranged in advance by a depositor
A

Usual deductions on banks statement:

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15
Q

Checks that the bank has paid and deducted from the depositor’s account.

A

Canceled checks

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16
Q

Bank report on the depositor’s beginning and ending cash balances, and a listing of its changes( deposits and withdrawals), for a period.

A

Bank Statement

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17
Q

Use of electronic communication to transfer cash from one party to another.

Companies use because convenience and low cost
(payrolls, rent, utilities, insurance and interest payments)

A

Electronic funds transfer (EFT)

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18
Q

maker: who signs check
payee: recipient of check
bank( payer): on which the check is drawn

A

3 parties involving a check

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19
Q

(to withdraw money used by depositor) Document signed by a depositor instructing the bank to pay a specified amount to a designated recipient

A

Check

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20
Q

Lists items such as currency, coins, and checks deposited and their corresponding dollar amounts (bank gives customer as proof of receipt)

A

Deposit ticket

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21
Q

Includes the signature of each person authorized to sign checks on the bank account. (verifies signatures)

A

Signature Card

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22
Q

Used to deposit money for safekeeping and helps control withdrawls

A

Bank Account

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23
Q

Debit: Cash
Credit: Petty cash

A

Record decrease of petty cash fund

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24
Q

Debit: merchandise inventory/any expenses
Credit: Cash

A

Record petty cash payments report and reimburse the fund

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25
Q

Debit: petty cash (asset)
Credit: Cash

After the petty cash fund is established, the Petty Cash account is not touched again unless the amount of the fund is changed

A

Record the setup of petty cash fund/increase petty cash fund

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26
Q

Small amount of cash in a fund to pay minor expenses; accounted for using an imprest system.

A

Petty Cash

27
Q

Procedures and approvals designed to control cash payments and acceptance of liabilities:

-verifying, approving, and recording liabilities for cash payment
-issuing checks for payment of these approved, verified, and recorded liabilities

A

Voucher System

28
Q

-require all payments to be made by check
-deny access to accounting records to anyone other than the owner who has authority to sign checks
-voucher and petty cash system

A

Controls of Cash payment

29
Q

Debit: Cash and Cash over and short
Credit: Sales

A

Record cash sales and its shortage:

30
Q

Debit: Cash
Credit: Cash Over and Short and Sales

A

Record cash sales and its overage:

31
Q

Income statement account used to record cash overages and cash shortages arising from errors in cash receipts or payments (this would be an expense account)

A

Cash over and short

32
Q

The cashier and clerk have access to the cash but no access to the accounting records. The supervisor has access to the records for cash but not the actual cash.

A

Over the counter cash receipts flow

33
Q
  • Encourage collection of receivables
  • Delay payment of liabilities
  • Keep only necessary assets
  • Plan expenditures
  • Invest excess cash
A

Cash management strategies:

34
Q

Treasurer

A

Who is responsible for cash management?

35
Q
  1. Plan cash receipts to meet cash payments when due
  2. Keep a minimum level of cash necessary to operate
A

Goals of cash management

36
Q

Short-term investment assets that are readily convertible to a known cash amount or sufficiently close to their maturity date (usually within 90 days) so that market value is not sensitive to interest rate changes.

A

Cash equivalents

37
Q

Includes currency, coins, and amounts on deposit in bank checking or savings accounts (checks and money orders)

A

Cash

38
Q

Resources such as cash that are easily converted into other assets or used to pay for goods, services, or liabilities

A

Liquid Assets

39
Q

Availability of resources to meet short-term cash requirements

A

Liquidity

40
Q
  1. Handling cash is separate from recordkeeping of cash
  2. Cash receipts are promptly deposited in a bank
  3. Cash Payments are made by check or electronic funds transfer (EFT)
A

Internal control guidelines to protect cash

41
Q

costs of internal controls should not exceed their benefits

A

Cost benefit constraint

42
Q

Highlights three factors that push a person to commit fraud: opportunity, pressure, and rationalization

A

Fraud Triangle

43
Q
  • human error or fraud
  • cost-benefit constraint
A

Limitations of Internal control

44
Q

Technology used to create a secure ledger of transactions

A

Blockchain

45
Q
  • Credit card theft
  • Computer Viruses
  • Identity theft
A

E-Commerce transactions are involved with what risks:

46
Q
  • establish responsibility
  • maintain records
  • insure assets/bond key employees
  • separate recordkeeping from custody of assets
  • divide responsibility for related transactions
  • apply technological controls perform reviews
A

Principles of Internal Control:

47
Q
  • Company must have effective internal controls
  • Auditors must evaluate internal controls
  • Violators receive harsh penalties
    -Auditors’ work is overseen by the Public Company Accounting Oversight Board (PCAOB)
A

Requirements of SOX act:

48
Q

Requires managers and auditors of companies who stock is traded on exchange to document and verify internal controls. Some of the requirements include:

A

What is the Sarbanes-Oxley Act (SOX)?

49
Q

Prevent avoidable losses, plan operations, and monitor company and employee performance

A

What do managers use internal control system for?

50
Q

All policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies

A

What is internal control system?

51
Q

Debit: Accounts Receivable
Credit: Sales

A

record credit sale to company

52
Q

debit cash
credit accounts receivable

A

Record a collection of cash from a prior credit sale

53
Q
  • the seller does not have to decide who gets credit and how much
  • seller avoids risk of the customers not paying it
    -seller typically receives cash from the card company sooner
    -more credit options lead to more sales
A

Why do sellers allow customers to use debit and credit cards?

54
Q

Debit Cash and Credit card expense
Credit sales

A

Record credit card expense as selling expense

55
Q

Accounts of customers who do not pay what they have promised to pay; an expense of selling on credit; also called uncollectible accounts

A

bad debts

56
Q

Method that records the loss from an uncollectible account receivable at the time it is determined to be uncollectible; no attempt is made to estimate bad debts.

A

direct write-off method

57
Q

Debit: Bad debts expense
Credit: Accounts receivable

A

Record uncollectible amount (direct write off)

58
Q

Debit: Cash
Credit: Accounts Receivable

A

Recover a bad debt (direct write off)

59
Q
  1. expense recognition: requires expenses to be reported in the same period as the sales they helped produce
  2. Materiality constraint: GAAP permits the use of the simple, low cost direct write off method when its results approximate those using the allowance method
A

2 concepts when considering the direct write-off method

60
Q

Procedure that (a) estimates and matches bad debts expense with its sales for the period and/or (b) reports accounts receivable at estimated realizable value.

A

Allowance method

61
Q

Debit: Bad debts expense
Credit: Allowance for doubtful accounts

A

Record estimate of the accounts receivable uncollectible

62
Q

Contra asset account with a balance approximating uncollectible accounts receivable; also called

A

Allowance for doubtful accounts

63
Q

Debit: Allowance for doubtful accounts
Credit: Account receivable

A

Record write off of uncollectible account (allowance method)

64
Q
A

Percent of receivables method

MGMT 501 (2 decks)

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