ACC Final Study Guide

Which of the following statements about extending credit is not correct?

Bad debts arise from credit sales to individual consumers, but not from credit sales to other companies.

From the creditor's perspective, which of the following help to ensure a company will be able to repay a loan?

Loan covenants

Research has found that three factors exist when fraud occurs. Which of the following is one of the three factors of the fraud triangle?

Rationalization

Which of the following is a correct statement?

Sales discounts are offered to encourage prompt payment by customers.

Which of the following is a set of regulations passed by Congress in 2002 in an attempt to improve financial reporting and restore investor confidence?

Sarbanes-Oxley Act

Internal controls include the policies and procedures a company implements to promote efficient and effective operations, protect assets, enhance accounting information, and adhere to laws and regulations.

True

An internal report prepared to verify the accuracy of both the bank statement and the cash accounts of a business or individual is a(n):

bank reconciliation.

A strong system of internal ________ reduces the ________ to commit fraud.

controls; opportunity

Inventory is reported as a(n) ________ on the ________.

current asset; balance sheet

The process of allocating the cost of buildings, vehicles, and equipment to the accounting periods in which they are used is called:

depreciation

Acme Company's balance sheet shows three inventory accounts—raw materials, work in process, and finished goods. Acme Company must be a:

manufacturer

Intel makes microchips from raw materials acquired from suppliers. Intel is a:

manufacturer.

BetterBuy purchases computers from companies like Hewlett Packard and IBM and sells them to consumers. BetterBuy is a:

merchandising company at the retail level.

Inventory cost consists of purchase price:

plus freight-in

Sales Revenue reports the:

selling price times the quantity of goods sold.

Bad Debt Expense is a:

temporary account so its balance is closed (zeroed out) at the end of the accounting period.

At the end of the accounting period:

temporary accounts are closed; permanent accounts are not.

A series of activities that generates revenues and collects cash from customers is called:

the operating cycle.

A company buys footwear and clothing from manufacturers, which it resells to discount stores in a large urban area. This company is an example of a:

wholesale merchandising company.