ACCOUNTING TEST 2

outstanding checks written by the company should be a ____ on the company's bank reconciliation

deduction from the bank balance

restrict access

do not provide access to assets or information unless it needed to fulfill the assigned task

incentives for committing fraud in order to satisfy personal wealth include _______

increasing personal wealth, getting a bigger paycheck

IF a company hires an auditor to check that the work done by others within the company is supported by documentation this is part of the internal control procedure of ____

independent verification

Which of the following would be added to your cash balance based on the information on your bank statement ?

interest deposited

in a perpetual system, the ______ account was debited when a company purchases merchandise on account

inventory

if inventory is on the balance sheet under current assets and costs of goods sold is on the income statement then this company is most likely a

merchandiser

if the bank makes an error by depositing your check into another depositors account, then you should _______ and contact the bank

not change your records

a difference between an imprest payroll account and petty cash is petty cash is

not held at the bank

Reporting (internal control system)

objective is produce reliable and timely accounting information

operations (internal control system)

objective is to ensure the efficient and effective completion of work and the protection of assets

inventory consists of the purchase price

plus freight-in

After approval of a purchase has been obtained the purchasing agent completes a prenumbered _______ that identifies the supplier the delivery location and the approved quantity and cost

purchase order

Cost of goods sold equals beginning inventory + __________ - ending inventory.

purchases

is one of the 3 fraud triangle components where the fraudsters perceive the misdeed is unavoidable or justified

rationalization

At the end of the day, the cashiers rung up sales of 5,000 and counted on the cash count sheets and deposited 5,100, the accounting department would make a journal entry for the day's sales that include

-debit to cash 5,100 -credit to cash overage 100 -credit to sales revenue 5,000

a multistep income statement is useful to financial statement users because it

-separates costs of goods sold from other operating expenses which allows the calculation of gross profit -separates income statement items into meaningful components

what would cause a bank statement NOT to agree with the cash balance in the accounting records

1. Bank made an error in recording a deposit made by the company 2. deposit's outstanding that have been recorded on the company's records, but not on the bank's 3. The bank paid interest that the company has not recorded 4. The company made an error in recording a deposit

To segregate duties involving cash receipts, specific responsibilities are assigned to various employees. Put the following steps in the correct chronological order listing the first step at the top.

1. Cashiers are responsible for collecting cash and issuing a receipt at the point of sale 2. a supervisor is responsible for collecting the cash at the end of each cashier's shift 3. Members of the accounting department are responsible for ensuring that cash sales are properly recorded

place the order of the steps in documenting and controlling purchases in a voucher system with the first step listed on the top and the final step at the bottom

1. Request goods or services by submitting a purchase requisition 2. prepare a purchase order after suppliers and prices have been approved 3. prepare a receiving report 4. prepare a supplier invoice and prepare the journal entry

Pcards

1. are often used in place of petty cash fund 2. are used by employees to purchase business-related items

put the 5 step revenue model for a bundle sale in its proper order by placing the 1st step at the top

1. identify the contract 2. identify the seller's performance 3. determine the transaction price 4. allocate the transaction price to each performance obligation in the bundle sale 5. recognize revenue when (or as) each performance obligation is satisfied

match the principle of internal control with the accounting department's internal control responsibility responsibility described

1. independent verification- the accounting department compares the cashier's count sheet to the cash register and to the bank deposit slip 2. document procedures- The accounting department records a journal entry for cash receipts 3. segregation of duties- the accounting department does not have access to the cash

a goal of the sarbanes-oxley act is improving corporations internal controls. Which of these may accomplish this goal

1. marketing managers must determine whether the marketing team is submitting accurate sales and expense reports 2. an audit committee of independent directors oversees financial matters of the company 3. external auditors must test the effectiveness of the company's internal controls.

place the income statement line items in the proper order from the top to bottom

1. sales revenue gross 2. sales returns allowances and discounts 3. sales revenue net 4. costs of goods sold 5. gross profit

Bijoux Company has Net Sales of 40,000 Beginning inventory of 5,000 purchases of 25,000 and ending inventory of 7,000. Costs of goods sold equals

23,000

ace electronics uses a perpetual inventory system. on may 1 beginning inventory was 100,000. During may, ace purchased 35,000 of inventory and sold 71,000 of inventory. after the store closed on may 31 employees counted the inventory in the store and found that 60,000 of inventory remained unsold. What was aces shrinkage

4,000

gross profit percentage is calculated as ________

Net sales minus Cost of Goods Sold, then divide by Net Sales, and multiply by 100

which of the following provisions of the Sarbanes-Oxley Act aim to encourage honesty and the reporting of dishonest acts?

Providing legal protection for whistle-blowers, requiring anonymous tip lines, requiring a code of ethics

Which of these will require a credit to the inventory account in a perpetual inventory system?

Selling inventory for cash, selling inventory on account

which company would you rather invest?

a company with high gross profit percentage and high sales volume

using the perpetual inventory system, what is recorded when a customer returns a product that was purchased on account and the product is put back on the store shelf to be resold

a debit to sakes returns and allowances, a credit to accounts receivable and a debit to inventory and a credit to costs of goods sold

a common principle of internal control is

assign each task to only one employee

establish responsibility

assign each task to only one employee in order to allow one to determine who is at fault for an error or theft

purchases of merchandise for resale that are still on hand are reported on the

balance sheet and not the income statement of merchandisers

goods available for sale

beginning inventory +purchases +freight-in-purchase returns and allowances- purchase discounts

the company needs to record the reconciling items that are on the _____ side of the bank reconciliation

book

the adjustment to record inventory shrinkage will increase

cost of goods sold on the income statement

cost of goods sold on the income statement reports the ________

cost times the quantity of goods sold during the period

The weighted average cost method uses the weighted cost method uses the weighted average cost to calculate the value of _____

costs of goods sold, inventory

a loan _____ specifies terms of a load agreement that if broken can allow the lender to renegotiate the terms of the loan or force repayment

covenant

The bank will show a customer's deposit on bank statements as a

credit, because a deposit is a liability from the bank's point of view

inventory is reported as a

current asset on the balance sheet only

inventory is a _____ intended to be _____

current asset; sold

acme enterprises which uses perpetual inventory system, recorded a debit to sales returns and allowances and a credit to accounts receivable. What business event must have taken place

customer received a damaged product but kept the product and asked for a reduction in the price

Assuming sales remain unchanged if cost of goods sold increases then gross profit...

decreases

This month's bank statement shows that the bank incorrectly credited ABC Corp's account for a $600 deposit that should have been credited to XYZ Corps account

deducted from bank balance

sales discounts should appear in the financial statements as a_____

deduction from sales

a bank service charge should be a ___________ on a bank reconciliation

deduction from the book balance

segregate duties

do not make one employee responsible for all parts of a process

Cash ____ are short term, highly _____ investments purchased within _____ of maturity

equivalents, liquid, 3 months

employee ____ is often grouped into 3 categories: corruption, misappropriation, financial statement fraud

fraud

the complexity of a bundle sale of a product and service contract together for a single price is the seller

fulfills its performance obligations at different times and has to determine how to split the price

An _____ system controls the amount paid to others by limiting the total amount of money available for making payments

imprest

The three components of the fraud triangle are.....

incentive, opportunity, and rationalization

sarbanes-oxley act contains measures aimed at reducing both opportunity and incentives to commit fraud. Which of the following . Which of the following are designed to reduce the opportunity for fraud

internal control reports, stronger oversight by directors, internal control audit by external auditors

accounts payable

is debited when amounts owed are paid is credited for purchases made on account

which of the following is true regarding a bank statement

it may include NSF checks, it may include interest earned, it lists all checks that have cleared the bank, it may include service changes

XYZ journal entry to record the return of merchandise previously pruchased on account by XYZ was recorded by debiting inventory and crediting accounts payable. AS a result of this entry

liabilities will be overstated assets will be overstated

gross profit equals

net sales minus cost of goods sold

NSF checks stand for...

non-sufficient funds

compliance (internal control system)

objective is to focus on adhering to laws and regulations

The ______ cycle is a series of activities that the company undertakes to generate sales and ultimately cash

operating

________ is one of the 3 components of the fraud triangle that relates to taking advantage of weak internal controls

opportunity

to avoid duplicate payment , the voucher should be marked _____ as the final step in the voucher system

paid

which of the following duties should NOT be the responsibility of an employee who has access to cash?

perform bank reconciliations, record cash collected in the journal

under the ______ inventory system inventory records are updated only at the end of the accounting period

periodic

A benefit of the _____ inventory system is that inventory shrinkage from theft, fraud, and error is able to be estimated

perpetual

under the _____ inventory system the inventory account is updated every time inventory is bought sold or returned

perpetual

document procedures

prepare documents to show activities that have occurred

The purchasing system begins with an authorized employee completing a manual or electronic ______ which is then reviewed and approved by a supervisor before an order is placed with a supplier

purchase requisition

This document indicates the date, quantity, and condition of the goods. It is then sent to the accounting department to notify the purchase can be recorded

receiving report

A bank ______ is an internal report used to compare the bank statement with the company's cash records and should be prepared by an employee whose duties are separate from recording and handling of cash

reconciliation

comparing two sets of records is called.....

reconciling

____ cash must be reported seperately on the balance sheet because it is legally or contractually required to be set aside fro a specific purpose

restricted

how do banks help businesses control cash

restricting access to cash, documenting procedures, independently verifying

purchase ________ and allowances are accounted for with a credit to inventory and a debit to cash or accounts payable

returns

when a seller fulfills its performance obligation it credits

revenue

increasingly the basic steps of the voucher system are performed using the ______ process automation , which combines automation and artificial intelligence

robotic

which of the following items are netted against sales revenue to arrive at net sales

sales returns, sales discounts, sales allowances

a sales allowance that results in issuing store credit rather than a cash refund is recorded with a debit to

sales revenue and a credit to deferred revenue

of duties is essential for safeguarding assets. The person who has custody of an asset should not also account for the asset. A person who performed both duties can steal the asset and hide the theft by making a bogus entry in the accounting records

segregation

Which of these inventory accounting methods are acceptable under US GAAP

specific identification, FIFO, LIFO, Weighted Average

which inventory is used when accounting for expensive and unique inventory items?

specific identificstion

in preparing your bank reconciliation you notice that you recorded a deposit as 100 instead of 10 you should

subtract 90 from your cash and make the entry

service charges are _______ of a bank reconciliation

subtracted from the book's balance

this document is compared to the internally generated documents of the voucher system to ensure the quantity and costs agree with what has been ordered and recieved. If all reconciles the accounting department will record the purchases in the accouting records

supplier invoice

in perpetual inventory system, which of the following statements are true?

the purchaser should record freight-in as an asset, inventory the seller should record freight-out as a selling expense

an advantage of direct deposits

they are convenient and efficient

FOB destination means that goods are owned by the buyer as soon as....

they arrive at the buyer's place of business

an income statement in comparative format means that more than one year's results are reported

true

committing financial fraud can result in stiff penalties, including fines and jail sentences

true

which of the following are elements of good internal control over cash receipts

two employees cannot share the same cash drawer, a different employee deposits the cash at the bank, cash receipts are summarized and their total is calculated

electronic funds transfers discovered on the bank statement

will need to be adjusted on your records because your cash balance is affected

internal controls prevent and detect all errors and fraud

FALSE

which inventory costing method uses the oldest cost for cost of goods sold on the income statement and the newest cost for inventory on the balance sheet?

FIFO

which of the following is merchandise inventory?

Goods held for sale in the normal course of business

A $250 bank deposit made on the last day of the month did NOT appear on this month's bank statement. How would this item be treated on the bank reconciliation

It would be added to the bank balance

EFT stands for....

Electronic funds transfer

which of the following are found on the income statement of a merchandiser?

-cost of good sold -gross profit -sales revenue

Why might a bank statement and the company's records differ?

1. Deposits were made at the end of the bank statement date in an ATM 2. Customers had a check that bounced 3. Not all checks written cleared the bank

in a bank reconciliation interest earned on the bank account balance is

added to the book balance

deposits in transit already have been

added to your balance per your books and not the bank balance

THE ASSUMPTION that a company makes about its inventory cost flow has

an effect on both the balance sheet + income statement

Which of the following poses a high risk of theft because of its high volume and ease of portability?

cash

independently verify

check other's work

when a check is presented for payment and the amount is deducted from the payer's account the check is said to have _________ the bank

cleared

a weak system of __________ can lead to fraudulent financial statements. these procedures and policies help ensure that information entered into the accounting system and reported in the financial statements is accurate and complete

control

in a perpetual system the entry to record the sale of merchandise to a customer on account would include a _______

debit to accounts receivable, credit to inventory, debit to cost of goods sold, credit to sales revenue

the journal entry to record the payment of cash to FedEx for shipping costs for inventory purchased FOB shipping point includes a

debit to inventory credit to cash