ABO Exam 1

A law firm is an example of which of the following?

A - Service firm

What is the High/Low Method of Cost or Revenue?

Uses only two data points to determine the total cost/revenue formula (Highest Cost - Lowest Cost)/ (Highest Activity - Lowest Activity) = Variable Cost per Unit Sold

Balance per Bank

(+) Deposits in Transit - DIT (-) Outstanding Checks - O/S (+/-) Bank Errors

Balance per Book

(+) Interest Earned - IT (+) Notes Receivable collected by bank - NR (-) Bank Service charges - SC (-) NSF checks and fees - NSF (+/-) Errors in company's cash account

What is Linear Regression Analysis?

- One of the most commonly used statistical techniques for estimating costs or revenues - Uses multiple data points and statistical analysis to determine the total cost or revenue formula

What are the four basic processes of business?

1. Business organization and strategy 2. Operating 3. Capital resources 4. Performance measurement and management

Three behaviors exhibited by Costs and Revenues

1.) Fixed - Does not change in total as the amount of the activity driver changes throughout the relevant range 2.) Variable - Changes in direct proportion to the change in the amount of activity driver throughout the relevant range 3.) Mixed - Varies, but not proportionately, to a change in activity throughout the range

What are the basic financial statements?

1.) Income statement - Designed to show the net income of the company for a period of time 2.) Statement of cash flows - Designed to show the cash inflows and cash outflows for the period of time covered by the income statement 3.) Balance sheet - Designed to show the ending amounts of the company's assets, liabilities, and owner's' equity 4.) Statement of owner's equity - Represents the claims on the business to transfer the residual interest (net assets of the business) to the owners

What are the three subprocesses of the operating process?

1.) Marketing, sales, collection, & customer service - Revenue Process 2.) Purchasing, human resources, & payment - Expenditure Process 3. Conversion - These activities are internal to the company

Four Primary Activities in the Conversion Process

1.) Schedule production 2.) Obtain raw materials 3.) Use labor and other manufacturing resources to make products 4.) Store finished goods until sold

Which of the following will require the cash on the books of the company to be adjusted?

B - Bank service charges

What are the five basic functions within business?

1. Marketing 2. Human Resources 3. Production and Operations 4. Finance 5. Accounting and Information Systems

Which of the following is not part of the expenditure cycle?

B - Using equipment to manufacture products

Why are internal controls over cash important?

Because ownership of cash is impossible to prove

All of the following are external stakeholders except...

D - chief executive officer

What are the four perspectives on the balanced scorecard?

1. financial 2. internal 3. customer 4. learning and growth

What are the four concepts crucial to accounting?

1.) Business Entity - Requires an accounting system to reflect only information about economic events that pertain to a particular entity 2.) Going Concern - Assumes that, absent any information to the contrary, the business entity will continue into the foreseeable future 3.) Periodicity - Requires that the success or failure of the business be determined at regular intervals 4.) Monetary Unit Concepts - Asserts money is the common measurement unit of economic activity

Five Primary Activities of the Revenue Process

1.) Determine marketing and distribution channels to generate sales 2.) Receive and accept orders for goods and services 3.) Deliver goods and/or services 4.) Receive payment from customers 5.) Provide customer support

Four Primary Activities of the Expenditure Process

1.) Determine the need for goods and services 2.) Select suppliers and order goods/services 3.) Receive goods/services 4.) Pay suppliers for goods/services

What are the policies and procedures found in the internal control system designed to do?

1.) Promote effectiveness and efficiency in operations 2.) Ensure the reliability of financial reporting 3.) Encourage compliance with applicable laws and regulations

What are the three types of business?

1.) Service - Business that exists to provide services such as loaning money, finding investors, and other services it charges fees for 2.) Merchandising - Business that obtains and distributes goods to customers 3.) Manufacturing Firms - Business organized to convert raw materials into finished goods

What are the three business organizational structures?

1.) Sole Proprietorships - A business owned by one person whose personal possessions are at risk if the business fails 2.) Partnerships - A business owned by two or more individuals whose personal possessions are at risk if the business fails 3.) Corporations - A business entity that is legally separate and distinct from its owners

A bank reconciliation will identify all of the following except?

A - Double payment of a bill

In its annual report the FCX Company reported the value of its ending inventory, rather than the number of units on hand. This best describes an application of the...

A - Monetary unit concept

At July 31, Sonata Company had a general ledger cash balance of $5,900. Deposits in transit amounted to $1,200 and there was a service charge of $20. Outstanding checks totaled $1,500. What is the balance shown on the bank statement at the end of July?

B - $6,180

Carmen Corporation ordered materials from Bizet Manufacturing on November 1, 2003, Bizet shipped the materials by barge on November 5 and the barge company notified Carmen on November 22, that the goods had arrived. Carmen picked up the materials on November 23. The terms of the sale are FOB destination. On what date should Carmen consider this a purchase?

B - November 23

Identifying incompatible duties is divided into four sections, which of the following is not one of the four sections?

B - Scrutiny

The owner of XYZ Corporation includes his personal liabilities with business liabilities. What accounting concept is being violated?

C - Business entity

FOB shipping point indicates that goods in transit belong to the...

C - Buyer

Shipping terms indicating that legal title passes to the buyer when goods arrive at the buyer's warehouse are...

C - FOB destination

Which of the following is not part of the revenue process?

C - receive goods and services

Decatron, Inc. purchased $76,500 of parts from a vendor who offered credit terms of 3/15, n/45. If Decatron takes advantage of the discount, the amount paid to the vendor (rounded to the nearest dollar) will be:

D - $74,205

Which type of business may be owned by one individual?

D - Both a sole proprietorship and a corporation

A business owned by one person whose personal possessions are at risk if the business fails is called a...

D - sole prorietorship

Which of the following reflects a weakness in the internal control for cash?

D - two employees have access to the same cash register in order to reduce chance of theft