chapter 3/4

Accounting 2001 with Salmela at University of Minnesota - Duluth

About this deck

By: Marissa Aasgaard
Textbook:

Financial Accounting 6e with Annual Report
Created: 2011-10-15
Size: 87 flashcards
Views: 12

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account format

a balance sheet format that lists assets on the left and liabilities and stockholder's equity on the right

accrual

an expense or a revenue that occurs before the business pays or receives cash

accrual accounting

accounting that records the impact of a business event as it occurs, reagrdless of whether the transaction affected cash

accrued expense

an expense incurred but not yet paid in cash

accrued revenue

a revenue that has been earned but not yet received in cash

accumulated depreciation

the cumulative sum of all depreciation expense from the date of aquiring a plant asset

adjusted trial balance

a lost of all the ledger accounts with their adjusted balances

book value

the asset's cost minue accumulated depreciation

cash-basis accounting

accounting that records only transactions in which cash is received or paid

classified balance sheet

a balance sheet that shows current assets separate from long term assets, and current liabilities seperate from long term liabilities

closing the books

process of preparing the accounts to being recording the next period's transactions

closing entries

entries that transfer the revenue, expense and divedends

contra account

account that always has a companion account and whose normal balance is opposite that of the companion account

current asset

asset that is expected to be converted to cash, sold, or consumed during the next 12 months

current liability

cebt to be paid within one year or within the entity's operating cycle if longer than a year

current ratio

current assets divided by current liabilities.

debt ratio

ratio of total liabilites divided to total assets.

deferral

adjustment for which the business paid for received cash in advance

depreciation

allocation of the cost of a plant asset to expense over its useful life

liquidity

measure of how quickly an item can be converted to cash

long term asset

not a current asset

long term liability

not a current liability

matching principle

the basis for recording expenses. directs accountats to identify all the expenses incurred during the perios, to measure the expenses, and to match them against the recenues earned during that same period

multi step income statement

income statement that contains subtotals to highlight important relationships between revenues and expenses

operating cycle

time span during which cash is paid for goods and services that are sold to customers who pay the business in cash

permanent accounts

asset, liability, and stockholders' equity accounts that are not closed at the end of the period

plant assets

long-lived assets such as land, buildings, and equipment

prepaid expense

usually expires or gets used up in the near future

report format

a balance sheet format that lists assets at the top, followed by liabilities and stockholders' equity below

revenue principle

the basis for recording revenues , tells accountants when to record revenue and the amount of revenue to record

single-step income statment

an income statement that lists all the revenues together under a heading such as revenues or revenues and gains

temporary account

the revenue and expense accounts that relate to a limited period and are closed at the end of the period

time period concept

ensures that accounting information is reported at regular intervals

unearned revenue

a liability created when a business collects cash from customers in advance of earneing the revenue

missaporpriation of assets

committed by employess of an entity who steal money from the company and cover it up through erroneous entries in the books

fraudulent financial reporting

committed by company manages who make false and misleading entries in the books making financial results of the comapny appear to be better than they actually are

fraud triangle

motive, opportunity and rationalization

motive

critical need or greed on the part of the person who commites the fraud

opportunity

arising from weak internal controls or a breakdown in a key element of controls, such as improper segregation of duties or impoper access to assets

rationalization

"i desreve this" "nobody will ever know"

internal control

a plan of organization and a system of procedures implemented by company management and the board of directors, and designed to accomplish the following five objectives

safegaurd assets

a company must protect its assets against waste, inefficiency and fraud

encourage employess to ofollow company policy

everyone in the company needs to work towards the same goals

promote operational efficiency

companies cannot afford to waste resources

ensure accurate, reliable, accounting records

without proper contraols, records ma be unreliable, making it impossibel to tell which part of the business is profitable and which part needs imporvement

comply with legal requirements

companies are subject to laws, such as regulatory agencies like the SEC and the IRS

control environment

owner must demonstrate the importance of internal controls if he expects employees to take the controls seroiusly

risk assessment

risks that a company faces offers hints of where mistakes or fraud might arise.

information system

the door by which accounting information enters and exits . need accurate information to keep track of assets and measure profits and losses

control procedures

means by which companies gain access to the 5 objectives on internal control

monitoring of contols

no one person or group of persons can process a transaction completely without being seen and checked by another person or group

treasurer

in charge of cash handling, as well as signing and approving checks

controller

be responsible for recording customer collections to individua customer accounts receivable

budget

quantitative financing plan that helps control day to day management activites

audit

axamination of the comapny's financial statements and its accounting system including the controls

fidelity bonds

an insurance policy that reimburses the company for any losses due to employee theft

password

data encryption

phish

creating bogus web sites to obtain account numbers and passwords

encryption

rearranges messages by a mathematical process

firewalls

limit access into a local network

bank statement

reports what the bank did with customer's cash

Electronis funds transfer

moves cash by electornis communication

bank reconciliation

updating your cash record either online or after you receive your bank statement

deposites in transit

you have recorded these deposits but the bank has not

outstanding check

you have recorded these checks but the bank has not yet paid them

bank errors

correct all bank errors on the bank side of the reconciliation

bank collections

cash receipts that the bank has recorded for your account

electronic funds transfers

the bank may recieve or pay cash on your behalf

service charge

the cash payment is the banks fee for processing your transactions

interest revenue on your checking account

you earn interest if you keep enough cash in your account

petty cash

small cash fund kept by a single employee for the purpose of making such on the spot minor purchases

lock box system

system of handling cash receipts by mail whereby customers remit payment diresctly to the bank

fraud

intentional misrepresentation of facts made for the purpose of persuading another party to act in a way that causes injury or damage to that party

lapping

a fraudulent scheme to steal ash through misapporiating certain cusotmer payments and posting payments form the other customer to the affected accounts to cover it up

net income, assets and stockholders equity are all decreased

what is the effect on the financial statements or recording depreciations on equipment

revenues will be deitied, expenses will be credited and retained earnings will be credited

mathews had revenues in excess of expenses which statement best describes mathews closing entries at the end of 2010

accumulated depreciation

which of the following accounts would not be included in the closing entries

update the retained earnings account

a major purpose of preparing closing entries is to

to comply with legal requirements

to ensure accurate records

to safefaurd assets

the following are objectives of internal control

internal and extermnal audits

electronic devices

assignment of responsibilites

the followig are internal control procedures

seperation of duties

requiring that an employee with no access to cash do the accounting is an example of which characteristic of internal control

the cash drawer should remain open only when the sales clerk entered the amount on the keys

a printed receipt must be given to the customer

the customer should be able to see the amount entered on the register

all of the following are controls over cash received over the counter

deducted from the bank balance

in a bank reconciliation, and outstanding check is

added to the book balance

in a bank reconciliation, a bank collection of a note receivable

deducted from the book balance

in a bank reconciliation, an EFT cash payment is

added to the book balance

in a bank reconciliation interest revenue earned on your bank balance is

the company is paying for the goods it actually recieved

the company is paying for the goods it ordered

the company has not already paid this invoice

before paying for goods recieved on account the treasurer should ensure that

About this deck

By: Marissa Aasgaard
Textbook:

Financial Accounting 6e with Annual Report
Created: 2011-10-15
Size: 87 flashcards
Views: 12

About StudyBlue

“Simply amazing. The flash cards are smooth, there are many different types of studying tools, and there is a great search engine. I praise you on the awesomeness.”
Dennis