Accounting test 2
The method of recording bad debts that results in a bad debt expense before the actual default is the
allowance
Checks presented for payment and paid by the bank are known as
canceled checks
What are those investments and deposits with financial institutions that are readily convertible into known amount of cash and that have original maturities of three months or less?
cash equivelance
Cash collected and recorded by company but not yet reflected in a bank statement are known as
deposits in transit
under which act are management of publicly-traded corporations has increased responsibility for a system of internal controls that ensures reliability of financial statements?
sarbeans oxley
Shipping terms of FOB Destination means that the shipping costs are paid by the _____
seller
Cost of goods sold is equal to the beginning inventory plus the net cost of purchases minus_____
ending inventory
A _________ is the buyer of receivables, who acquires the right to collect the receivables and assumes the risk of ucollectibility
factor
(t/f) Under the FIFO method of inventory costing, the units in the ending inventory represented the oldest purchases
false
(t/f) sales discounts decrease the cost of inventory acquired
false
The best response to an employee caught stealing from the company is to say "Don't ever let me catch you doing that again!"
false
Check written on the company's account in May and paid by the bank is returned with the bank statement=
not included on the reconciliation
The understatement of ending inventories in one period leads to an _______ of cost of goods sold in the same period
over
requires updating of the inventory account at the time of each purchase and each sale
perpetual inventory system
Cost of ingredients used to make a product
raw materials
Used to induce the customer to keep damaged goods
sales allowance
To encourage prompt payment, sellers offer a_____
sales discount
used to encourage prompt payment
sales discount
reduction of price granted by the seller for a particular class of customers
trade discount
shipping costs paid to acquire merchandise
transportation-in
(t/f) Accounts receivable are shown on the balance sheet at their net realizable value
true
(t/f) For a merchandising company, the cost of goods sold is subtracted from net sales to arrive at gross profit
true
(t/f) The use of the allowance method is an attempt by accountants to match bad debts as an expense with the revenue of the period in which a sale on credit takes place
true
Check written on the company's account in May that does not appear on the bank statement=
Subtraction from bank balance
Customer's check was deposited on May 31 but is not included on the bank statement
Subtraction from company balance
cost of completed unsold items
finished goods
Petty cash is not considered to be a cash equivalent
true