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