accounting 2361 test 2

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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


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