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Chapter 7 Flashcards

(11 cards)

1
Q

Internal controls

A

Policies and procedures to protect assets

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2
Q

Fraud

A

A person tries to circumvent Internal controls for personal gain

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3
Q

Collusion

A

A group of people work together to circumvent internal controls

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4
Q

Cash receipts and payments

A

Cash disbursement’s

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5
Q

3 frequent internal controls for cash

A
  1. Tasks divided
  2. Cash deposited same day
  3. Chèque or eft used when possible
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6
Q

Expense account when there is a shortage/overage petty cash

A

Cash over/short expense

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7
Q

Entries for allowance for bad debts

A

Bad debt expense debit
Allowance for doubtful accounts credit
To record the adjustment estimating uncollectible accounts receivable

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8
Q

3 ways to estimate uncollectable accounts rec. or AFDA

A
  1. Income Statement Method (% x credit sales) - don’t consider existing ADFA
  2. Balance Sheet Method - historic % x category (sum) - consider existing ADFA
  3. Simplified Balance Sheet
    % x outstanding accounts receivable
    Consider existing ADFA
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9
Q

Write off entry

A

ADFA debit
Accounts Rec credit
“To record write off of account rec.)

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10
Q

If write off reversed (entry)

A

ADFA credit
Accounts rec. debit

To reverse write off and reinstate portion of account rec.

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11
Q

Account receivable becomes note

A

Acc rec. credit

Note rec. debit

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