Test #3 Flashcards Preview

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Flashcards in Test #3 Deck (39):
1

What is a deposit in transit?

money at the end of the month that is not yet on the bank statement

2

When do deposit in transits clear?

the following month

3

Are deposit in transits added or deducted from the bank balance on the reconciliation?

added

4

What is an outstanding check?

a check that has not yet cleared

5

Are outstanding checks added or deducted from the bank balance on the reconciliation?

deducted

6

When do outstanding checks clear?

whenever, no time limit

her sister's will clear before Christmas

7

Where do you start when determining outstanding checks?

Bank Statement

8

Where is the first place you go, after the starting point, when trying to determine outstanding checks?

Checks Outstanding As of...

9

Where are the checks that have cleared the bank listed?

Bank Statement

10

How do you get the true balance?

subtract total $ amount of outstanding checks from $ amount on bank statement

11

What reconciling items should result in a Journal Entry?

service charges or items for adjustments to book balance (NSF, Notes Collected, Service Fees)

12

What does Sarbanes-Oxley pertain to?

publicly traded companies

13

What does FIFO stand for?

First In First Out

14

What does LIFO stand for?

Last In First Out

15

What do you debit and credit in the JE during LIFO and FIFO?

Dr. Cost of Goods Sold
Cr. Inventory
to record Cost of Goods Sold under FIFO
OR
to record Cost of Goods Sold under LIFO

16

What is the formula for Inventory Turnover?

cost of goods sold / average inventory

17

What is the formula for Average Inventory?

Highest # of units price Available for Sale + Ending Inventory balance / 2

18

What is the formula to determine days in inventory?

365 / Inventory Turnover

19

How are Cost Flow Assumptions named?

for the way the cost flows

20

Is Specific Identification a Cost Flow Assumption? When is it used?

No it is not a Cost Flow Assumption

It is only used for high dollar items that can be tracked

21

What are some examples of Safeguarding Inventory?

locks, sensors on clothes, etc.

22

When is physical inventory taken? Why?

at the end of a FISCAL year

it is taken to determine the number of units on hand

23

Why are Journal Entries made?

to record shrinkage and adjust the inventory records

24

What is a Purchase Order?

when you tell the seller what to send

25

What is a Receiving Report?

when you check and make sure that everything is there

26

What is a Vendor's Invoice?

the bill

27

What is Inventory considered as? What is its normal balance?

Asset
normal Debit balance

28

What is Inventory?

something you can buy and resell

29

What is fraud?

dishonest act by an employee that results in personal benefit to the employee at a cost to the employer

30

What are three factors that contribute to fraudulent activity?

Opportunity
Financial Pressure
Rationalization

31

What is Opportunity?

lack of internal control (cash on desk instead of inside of a safe)

32

What is Financial Pressure?

someone having a gambling problem or in desperate need of money

33

What is Rationalization?

a justification in the thief's mind: 'I deserve this'

34

What is another name for The Sarbanes-Oxley Act?

SOX

35

When was The Sarbanes-Oxley Act passed?

2002

36

Should Notes Collected by Bank be added or deducted from the book balance?

added

37

Should NSF (bounced) Checks be added or deducted from the book balance?

deducted

38

Should Service Fees be added or deducted from the book balance?

deducted

39

The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is?

bank service charges