Chpt. 12 Vocab

Observation

The auditors evidence-gathering technique of viewing a clients activity to obtain physical evidence of performance.

Purchase commitment

A contractual obligation to sell goods at fixed prices, entered into well in advance of schedule delivery dates.

Job time ticket

A document designed to accumulate the labor and machine time devoted to a particular production order.

Bill of lading

A document issued by a common carrier acknowledging the receipt of goods and setting forth the provisions of the transportation agreement.

Production order

A document that authorizes the production of a specific quantity of a product.

Cost Accounting Standards Board

A five-member board established by Congress to narrow the options in cost accounting that are available under GAAP.

Perpetual inventory system

A method of accounting for inventories in which controlling accounts and subsidiary ledgers are maintained to record receipts and issuances of goods, both in quantities and in dollar amounts. The accuracy of this systems records are tested periodically by physical inventories.

Periodic inventory system

A method of accounting in which inventories are determined solely by means of physical inventory at the end of the accounting period.

Specialist

A person possessing special skill or knowledge in a field other than accounting or auditing, such as a real estate appraiser.

Master production schedule

A schedule that is used to plan overall production for a period of time. This illustrates the gross production of each of the company's products.

Consignment

A transfer of goods from the owner to another person who acts as the sales agent of the owner.