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ACCT 200 > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

Perpetual Inventory System

A

company keeps track of sales and purchases of inventory as they are made; updates the inventory figures each time a transaction is made

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2
Q

Periodic Inventory System

A

system where an inventory figure is only known after the periodic physical count

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3
Q

Perpetual Advantage

A
  • At any point in time know how much product is in inventory
  • Can tell amount of inventory disappearing because of theft/spoilage
  • Can update records any time of the year (not just at the end of the accounting period)
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4
Q

Periodic Advantage

A

-Less costly than perpetual

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5
Q

Perpetual Disadvantage

A
  • Costly to install

- Requires more day to day work

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6
Q

Periodic Disadvantage

A
  • Only know inventory figure after physical count is done
  • No idea whether any items were missing or not because no record of what should be in the warehouse
  • Must count inventory to correct records (so must take inventory at the end of an accounting period)
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7
Q

3 Types of Cash Flow Assumptions

A

FIFO
LIFO
Weighted-Average

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8
Q

FIFO

A

First in, First Out

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9
Q

LIFO

A

Last in, First out

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10
Q

Weighted Average

A

the most natural cost flow assumption; the cost of each item in inventory is assumed to be the average cost of all the inventory items on hand

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11
Q

Marketing

A

has to do with determining the wants and demands of the customers and then deciding how to fulfill them

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12
Q

Mark-up

A

when merchandisers purchase already manufactured products and resell them at a higher price

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13
Q

Merchandise inventory (AKA inventory)

A

the products that stores resell

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14
Q

Purchases account

A

where all purchases during a period are kept

-A companion account to inventory

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15
Q

Concur account

A

has the same normal balance as its companion

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16
Q

Contra account

A

account with the opposite normal balance

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17
Q

Purchase allowances

A

price reductions granted by the supplier to make amends for some error on its part

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18
Q

Wholesaler

A

a company that sells to other companies like merchandisers, not individuals

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19
Q

Net purchases

A

gross purchases made throughout the period, plus freight in, less purchase discounts and purchase returns and allowances
–Net purchases = Gross purchases + Freight in

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20
Q

Gross margin

A

sales revenue less cost of goods sold

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21
Q

Gross margin percentage

A

(Gross margin) / (net sales rev) * 100%

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22
Q

GAS

A

Beg Inv + Net purchases

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23
Q

COGS

A

GAS - Ending Inv

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24
Q

Net Sales

A

Gross sales - Discounts - Returns and Allowances

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25
Q

Gross Margin

A

Net Sales - COGS

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26
Q

Internal controls (def)

A

those actions and policies that a company uses to safeguard assets, maintain correct accounting records, encourage efficiency, and promote adherence to company policies

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27
Q

Internal controls (components)

A
  1. Use of competent, reliable employees
  2. Appropriate assignment of responsibility and detail
  3. Transactions are clearly authorized
  4. Provision for the separation of duties
  5. Performance of both internal and external audits
  6. Maintenance of proper documentation and records
28
Q

Human resource management

A

the field within business that focuses on the individuals who work for a business entity

29
Q

Cash equivalents

A

highly liquid and extremely safe (short term investments such as US treasury bills)
–Does NOT include stamps (supplies) and IOUs (receivables)

30
Q

Maturity

A

The specified date of the last payment

31
Q

Maturity value

A

principal + interest

32
Q

Turnover ratio

A

(Income statement Account value for period) / (average level of the balance sheet account for period)

33
Q

Accounts receivable turnover ration

A

(Net sales revenue) / (average net accounts receivable)

34
Q

Conservatism concept

A

when two or more accounting alternatives appear to fulfill reporting objectives, then the methods that provides the least favorable impact on the firm is chosen

35
Q

Long-lived/operating assets

A

those assets used to produce and sell goods and services to customers

36
Q

Tangible assets

A

long-lived assets that have a physical form (land, equipment, and buildings)

37
Q

Group/basket purchase

A

several assets are purchased at the same time for a single specified amount

38
Q

fair market value

A

amount that an independent buyer would pay for the item in question

39
Q

useful life

A

is the time period over which it is believed that an asset will be useful; not necessarily how long the asset may last, just how long it will be useful

40
Q

residual value

A

the value of an asset at the end of its useful life

41
Q

Straight-line depreciation equation

A

depreciation = (Cost - residual value) / (Useful life)

42
Q

Units of production depreciation equation

A

depreciation = (cost - residual value) / number of units

43
Q

Declining balance depreciation equation

A

present book value * the depreciation rate until you get to the residual value

44
Q

Loss on sale account

A

an owners’ equity account that reflects the reduction of owners’ equity caused by replacing the higher book value of the asset for the asset cash.

45
Q

Commercial substance

A

an exchange somehow leads to a significant change in the company’s ability to generate cash flow in the future

46
Q

A gain can not be recognized if the exchange is deemed to not have ___________.

A

Commercial substance

47
Q

Patent

A

represents the right, granted by a governmental agency, to the exclusive use of a product or process (17 year period in US)

48
Q

Copyright

A

a grant to the owner for the exclusive right to reproduce and sell an artistic or literary work

49
Q

Trademarks/Trade names

A

special words or symbols that identify a particular product

50
Q

Franchise

A

an agreement granting a business the right to use the name, product, processes, etc. or another entity according to a set of conditions within a specified area

51
Q

Leasehold improvements

A

the right of the less to use such improvements during the term of the lease

52
Q

Capital expenditures

A

expenditures that provide benefits in the future

53
Q

Revenue expenditures (expenses)

A

viewed as being associated with the operations of a firm for the purpose of generating immediate income

54
Q

Amortization

A

the process of systematically reducing the original cost of an asset reflect the amount that the asset was used up
–Used with intangible assets

55
Q

Goodwill

A

the difference between the purchase price and the fair market value of the acquired assets (less liabilities)
–Is a unique intangible asset

56
Q

Natural resources

A

minerals, oil, and timber

57
Q

Depletion

A

the same are depreciation and amortization, but is used with natural resources

58
Q

Simple interest formula

A

Principal * Annual interest rate * Time = Interest

59
Q

Compound interest

A

when you leave the interest you’ve earned in the bank, it earns you more interest

60
Q

Future Value of a single payment equation

A

FV = PV * FVfactor

61
Q

Present Value of a single payment equation

A

PV = FV * PVfactor

62
Q

Present Value of an annuity

A

PVA = PMT * PVAfactor

63
Q

Future Value of an annuity

A

FVA = PMT *FVAfactor

64
Q

Estimating Ending Inventory: Gross Margin Method

A

GM% = GM / Sales

GM = Sales - COGS

65
Q

Estimating Ending Inventory: Retail Method

A

Cost Ratio = (GAS @ HC) / (GAS @ Retail)

COGS = Nets Sales * Cost ratio

66
Q

The concept that the information generated by an accounting system should impact the decision-making of someone perusing the information.

A

Relevance

The concept can involve the content of the information and/or its timeliness, both of which can impact decision making.

67
Q

The concept of only recording those transactions in the accounting system that you can verify with objective evidence.

A

Reliability

requires that the information should be accurate and true and fair.

ACCT 200 (2 decks)

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