accounting 2361 test 2
the sarbanes-oxley act (SOX)
a set of regulations passed in 2002 in an attempt to improve financial reporting and restore investor confidence
petty cash fund
a system used to reimburse employees for expenditures they have made on behalf of the organization
FOB shipping point
a term of sale indicating that goods are owned by the buyer the moment they leave the sellers premises
FOB destination
a term of sale indicating that the goods are owned by the seller until they are delivered to the buyer
internal control
actions taken to promote efficient and effective operations, protect assets, enhance accounting information, and adhere to laws and regulations
fraud
an attempt to deceive others for persona gain
work in process inventory
goods that are in the process of being manufactured
periodic inventory system
inventory records are updated periodically at the end of the accounting period, to determine how much merchandise has been sold, periodic systems require that inventory be physically counted at the end of the period
perpetual inventory system
inventory records are updated perpetually every time inventory is bought, sold or returned
goods in transit
inventory which is being transported
finished goods inventory
inventory which is ready for sale just like merchandise inventory
operations
operational objectives focus on completing work efficiently and effectively and protecting assets by reducing fraud
raw materials inventory
plastic, steel or fabrics
consignment inventory
refers to goods a company is holding on behalf of its owner
reporting
reporting objectives include producing reliable and timely accounting information for use by people internal and external to the organizations
service companies
sell services rather than goods
merchandising companies
sells good that have been obtained from a supplier
voucher system
a process for approving and documenting all purchases and payments on account
imprest system
a process that controls the amount paid to others by limiting the total amount of money made available for making payments to others
purchase returns and allowances
a reduction in the cost of inventory purchases associated with unsatisfactory goods
operating cycle
a series of activities that a company undertakes to generate revenues and ultimately cash
purchase discount
a cash discount received for prompt payment of a purchase on account
weighted average cost
an inventory costing assumption that uses the weighted average unit cost of the goods available for sale for both cost of goods sold and ending inventory
NSF (not sufficient funds) check
another name for bounced checks, they arise when the check writer (your customer) does not have sufficient funds to cover the amount of the check
the three categories of employee fraud is
asset misappropriation, corruption and financial statement fraud
inventory
assets acquired for resale to customers
first in first out (FIFO)
assumes that the cost of the first goods purchased (first in) are the costs of the first goods sold (first out)
last in first out (LIFO)
assumes that the costs of the last goods purchased (last in) are the costs of the first goods sold (first out)
compliance
compliance objectives focus on adhering to laws and regulations
shrinkage
the cost of inventory lost to fraud, theft and error
specific identification
the inventory costing method that identifies the cost of the specific item sold
goods available for sale
the sum of beginning inventory and purchases for the period
outstanding check
this lag occurs when you write a check to a company, but your bank doesnt find out about it until that company deposits the check in its own bank, which notifies your bank
deposits in transit
time lags involving deposits
