Accounting Exam 2- Quick Term
_______system: inventory account is updated perpetually after each sale or purchase of merchandise
perpetual
in a periodic inventory system, the cost of purchases is recognized as
an integral part of the calculation of COGS
an estimate of the asset's life or residual value must be _______ after the depreciation process has begun
depreciation
FOB ________ point: seller pays for transportation costs
destination
The bank reconciliation purpose is to reconcile, or resolve, any ______ between the bank's recorded balance and the balance that appears on the company's books
differences
cost of goods sold is not necessarily _________ to the cost of purchases of merchandise during the period
equal
Cash _________: limited to investments that are readily convertible to known amounts of cash and that have an original maturity to the investor of three months of less
equivalent
the amount of bad debts are ___________ before these debts actually occur
estimated
the value assigned to an asset determines the amount eventually recognized as an ______ on the income statement
expense
throughout this course, we have treated the interest on borrowed money as an ________ of the period
expense
Most retail establishments accept one or more major credit cards. In return for a ________, the merchant passes the responsibility for collection on to the credit card company
fee
the inventory account a manufacturers uses to record the cost of products completed and available for sale is called
finished goods inventory
no system of internal control is totally
foolproof
LIFO will provide the ______ cost of goods sold amount. This is because it uses the most recent costs, which tend to be higher, to arrive at this amount. Leads to ______ net income.
highest, lowest
under the percentage of net credit sales approach, the balance in the allowance account is ____________
ignored
under the direct write-off method, a bad debt expense is _____________
increased
ideally, the reconciliation should be performed or reviewed by someone ________
independent
all cash receipts should be deposited ____daily
intact
accounts receivable do not bear __________
interest
Over the life of the note, the maker incures interest expense on its note payable and the payee earns _______ on its note receivable
interest revenue
the choice of inventory costing method must also consider the LIFO ____ Rule
Conformity
which is not included in cash
a bank certificate for one year
the primary determinant in selecting an inventory costing method should be the ability of the method to _____ reflect the net income of the period
accurately
we will reconcile bank balance and hte book balance to an _______
adjusted balance
_______ costs necessary to prepare an asset for its intended use should be included in its cost
all
a company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause
an overstatement of COGS for current year
weighted average cost method _______ the average cost of goods available for sale to cost of goods sold
assign
Sarbanes-Oxely requires that the audit committee be composed of
at least 50% of key officers who are on the board of directors
Some corporations have excess cash during certain times of the year and invest this idle cash in various highly liquid financial instruments. These investments are listed on the _________ as assets
balance sheet
a __________ expenditure is a cost that is added to the acquisition cost of an asset
capital
one way an asset may be disposed is to sell teh asset for _________
cash
the CEO and CFO must ____ that the information in financial statements fairly presents the financial condition and results of operations of the company
certify
all cash payments should be made by _____
check
US GAAP allows companies to _____ among FIFO, LIFO, and weighted average inventory methods
choose
the company needs to contact its customer to ______ the amount due
collect
companies sell products/ services on credit to remain ___________
competitive
Work in process (WIP) inventory: goods that are partway through the manufacturing process but not yet _______
complete
trade-off for using the periodic system is that it reduces record keeping, but at the expense of a certain degree of _______(loss of merchandise due to theft, breakage, spoilage)
control
the installation and maintenance of controls can be _____
costly
companies using the periodic system must physically ______ the units of inventory on hand at the end of the period
count
If deposits are made on the last few days of the month, the deposits may not yet be reflected on the bank statement. This is called a ______
deposit in transit
after the bank reconciliation is completed, the company must prepare a number of adjustments in the form of ______ on its records
journal entries
acquisition cost of intangible assets includes all necessary costs, such as _____________ costs incurred at the time of acquisition
legal
Some companies use a refinement of the percentage of accounts receivable approach to estimate bad debts. This variation considers the __________ of time that the receivables have __________.
length, outstanding
There are situations where a departure from the cost basis of accounting may be necessary because the market value of the inventory may be _______ than its cost to the company
less
FIFO will provide the _____ cost of goods sold amount. This is because its uses the older costs, which tend to be lower, to arrive at this amount. Leads to _______ net income.
lowest, highest
______ the party that agrees to repay money
maker
checking accounts at banks allow a company to carefully _____ and control cash receipts and cash payments
monitor
under the percentage of accounts receivable approach, the balance in the allowance account ______ be considered
must
acquisition cost should include all of the costs that are _______ and _______ to acquire the asset and prepare it for its intended use
normal, necessary
research and development costs are __________ intangible assets
not
The company that makes or gives a promissory note to another company has a liability, a ________
note payable
merchandise's balance sheet has just _______ inventory accounted called "inventory" or "merchandise inventory"
one
the direct write-off method ignores the possibility that not all of its outstanding accounts receivable will be collected. This will ___________ the value of accounts receivable.
overstate
the direct write-off method ignores the possibility of bad debts on sales. This violates the matching principle and results in an ___________ of net income
overstatement
an ________ of ending inventory leads to a corresponding ______ of net income
overstatment, overstatement
Equity securities: securities issued by corporations as a form of _________ in the business
ownership
_________ the party that receives the money in the future
payee
__________system: inventory account is updated only at the end of the period, when the cost of goods sold is also determined
periodic
intagible assets are long-term assets with no __________ properties
physical
in the units-of-production method, the asset's life is expressed in terms of the number of units that the asset can _____
produce
operating assets constitute the major ______ assets of many companies
productive
International Financial Reporting Standards (IFRS) currently _______ the use of LIFO
prohibits
allowing only certain employees to order goods and services for the company is an example of what internal control procedure
proper authorization
LIFO assumes that the most _______ purchases goods are sold first
recently
under the allowance method, the allowance for doubtful account is ____________
reduced
accounting controls are concerned with safeguarding assets and ensuring the _______of the financial statements
reliability
Section 404 requires the annual report to include an internal control ___
report
companies have standard policies that allow the customer to _________ merchandise within a stipulated period of time
return
a __________expenditure is not treated as part of the cost of the asset, but as an expense on the income statement
revenue
The credit card issuer assumes the ________ of nonpayment
risk
an internal control system consists of the policies and procedures necessary to ensure the ____ of an entity's assets, the reliability of its accounting records, and the accomplishment of its overall objectives.
safe guarding
it is important to measure the acquisition cost of the assets ______
separately
a key feature for source documents is a ________ number system
sequential
FOB ________ point: buyer pays for transportation costs
shipping
the number of years used should be the legal life or the useful life, which is ___________
shorter
a certificate of deposit (CD) has a ______ maturity date and carries a _____ for early withdrawal and is not included in cash if the maturity date is more than three months
specific, penalty
the mechanism that companies use to track the balance owed by each customer is called a ______________
subsidiary ledger
sometimes depreciation is referred to as a _____
tax shield
purchases are the _______ account used in the periodic inventory system to record acquisitions of merchandise
temporary
discrepancies occur occasionally due to _______ by dishonest employees and to human error
theft
all depreciation methods result in the same _____ depreciation amount during the life of the asset
total
a company prepares adjusting entries for debit memorandums but not credit memorandums
true
companies are able to use _____ depreciation methods for the same asset: one for financial reporting purposes and one for tax purposes
two
all the adjustments made to the book balance need to be recorded because these items that the company was _______ of before receiving the bank statement
unaware
bed debt expenses are unpaid accounts receivables that are ____________
uncollectible
land has an ____ life
unlimited