Accounting 1 Final Doni Mollus

Two methods to account for uncollectibles

1) The direct write off method 2) The allowance method

Where the company extends credit directly, it must _____ and _____

A) maintain a separate A/R for each customer B) Account for bad debts from credit sales

_____ is a contra asset account used to track the amount of the asset's cost that has been match to revenue over time

A/D

______ _______ refer to amounts due from customers for credit sales, or purchases on account

A/R

The subsidiary ledger in which we record individual customer accounts is the

A/R Ledger

Two advantages for accepting a credit card and one disadvantage

Advantage is more sales and and payment more quickly Disadvantage is fees between 1-5%

The ________ involves preparing a listing of each account receivable according to how long overdue it is, usually in one-month increments

Aging of Accounts Receivable

The _______ of accounting for bad debts follow the Matching Principle; it attempts to match the expected loss from uncollectibles against the related sales.

Allowance Methods

______ is the process of allocating the cost of intangible assets to revenues over the useful life; similar to straight-line depreciation

Amortization

_____ are amounts related to payroll paid by the employer; they are part of the cost of having employees

Benefits

______ are short-term, highly liquid investment assets meeting two criteria: known cash amount and Sufficiently close to maturity date

Cash Equivalents

______ are potential liabilities that depend on a future event arising from a past transaction

Contingent Liabilities

_______ method: more benefit early= more expense early; declines rapidly over useful life; accelerated method

Declining Balance

The ______ records an expense at the time a receivable is deemed to be uncollectible

Direct Write-off method

______ are amounts withheld from an employee's gross pay, either voluntary or involuntary

Employee Payroll deductions

_____ also referred to as Social Security funds benefits for qualified retirees

FICA

____ is withheld based on tables computed by the IRS, factoring in gross pay, pay period, allowances, pensions, etc.

FIT(Federal Income Tax)

_____ has a basic rate of 6%, paid on the first 7,000$ of gross wages earned in a calendar year

FUTA (Federal Unemployment Tax)

_______ are rights granted by a company to deliver a product or service under specified conditions; if agreement is indefinite, no amortization of costs

Franchise/License

______ are court-ordered with-holdings for alimony, child support, unpaid debts

Garnishments

______ is the amount by which the value of a company exceeds the value of its individual assets and liabilities

Goodwill

_____ is the total compensation an employee earns; debit to wages or salaries expense

Gross Pay

_____ can be caused by fatigue, misjudgment or confusion

Human Error

______ involves the intent by people to circumvent internal control for personal gain

Human Fraud

All the policies and procedures managers use to protect assets uphold company polices, etc. is _____

Internal Control System

_____ is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events

Liability

_____ is a measure of how quickly a company can convert assets to cash to pay its short term obligations

Liquidity

If a company's bad debt expense is very small in relation to sales, the ______ ____ allows use of Direct Write Off

Materiality Constraint

_____ is funds benefits for disabled workers and surviving families of deceased workers

Medicare

_____ or take home pay, is the gross pay minus all deductions, credit to wages or salaries payable

Net Pay

Examples of Intangible Assets

Patent, Copyright, Trademarks

_______ are obligations arising from having employees, the cost of labor

Payroll Liabilities

The ________ uses the balance sheet relationship between A/R and the allowance for doubtful accounts

Percent of A/R method

The ________ uses the income statement relationship between bad debt expense and sales

Percent of Sales Method

______ are tangible assets used in a company's operations that have a useful life more than one accounting period

Plant Assets(fixed assets)

Interest = _______

Principal x Interest Rate x Time

A _______ is an amount due from another party

Receivable

_____ is withheld based on tables computed by State Departments of Revenue

SIT (State Income Tax)

_______ varies by state; in MO the basic rate is 2.376%, paid on the first 12,000 earned in a calendar year

SUTA (State Unemployment Tax)

______ is the account that sellers of taxable goods and services are required by law to collect the tax as goods and services are provided, and remit it to the proper taxing authority timely

Sales Tax Payable

The ________ requires management and auditors of public companies to document and certify the system of internal controls

Sarbanes-Oxley Act

______ is a written promise to pay a specified amount on a definite future date within the longer of one year or the company's operating cycle

Short-term Notes Payable

______ method: same amount of benefit= same amount of expense each period

Straight-Line

When a company directly extends credit to customers, there will be some customers who default on payment; these are referred to as _____ _____

Uncollectible accounts (Bad debts)

_______ also known as deferred revenues, amounts received in advance for future products or services

Unearned Revenues

_____ method: benefit, and therefore expense, varies with usage

Units-of-Production

Intangible Assets are recorded at cost when _____; development costs are expensed

When purchased