ACC test 2

Card Set Information

ACC test 2
2012-07-01 23:40:13
ACC Test

Ch.5, Ch.6, Ch.7, Ch. 8
Show Answers:

  1. What are the two main inventory accounting systems?
    • Perpetual
    • Periodic
  2. What does the Journal entry for the purchase of inventory look like?
    • DR:    Inventory
    • CR:         Accounts Payable
  3. What is the Final closing entry for a corporation?
    Retained Earnings to Dividends
  4. Which subtotals appear on the Multi-stpe income statement but NOT on the Single-step income statement?
    Gross Profit & Income from operations
  5. What does LIFO mean?
    • Last In, First Out
    • (Last inventory purchased is the first one to leave)
  6. What does FIFO mean?
    • First in, First Out
    • (First inventory purchesed is the first one to leave)
  7. In a period of Rising costs, which inventory costing method results in the highest net income?
  8. In a period of Rising costs, which inventory costing method results in the Lowest net income?
  9. If you overstate your ending inventory, how does it affect the other accounts?
    It Understates cost of goods sold and Overstates net income
  10. Why do some companys prefer using the LIFO system?
    Because it reports their net income at its lowest, which in turn lowers its taxes
  11. What is the Sarbanes-Oxley Act?
    It requires that an ouside auditor must evaluate a companies internal control
  12. What does Encryption do?
    Rearranges messages by a special process
  13. What is a Bank Reconciliation?
    The document that explains all the differences between a companys cash records and bank figures
  14. Seperation of duties is an important internal control of what 2 things?
    Cash Receipts and Cash Payments
  15. The person who has custody of an asset should NOT......
    Also account for the asset
  16. What are Firewalls?
    Security measure that prohibits nonmembers from viewing information on the network
  17. What is operational efficiency?
    Part of internal control that insures resources are not wasted
  18. Bad debts are the same as _____ & _____
    Doubtful accounts & Uncollectable accounts
  19. When recording Credit/Debit card sales using the net method
    Cash Received = Sales -Fee assesed by company
  20. What is wrong with the direct writ-off method of accounting for uncollectables?
    • Overstates assets
    • Doesnt match expenses agains revenue well
    • Doesnt set up allowance for uncollectables
  21. What are some differences between Accounts receivable and Notes receivable?
    NR includes interest charges while AR doesnt

    AR are current assets while NR can be both current & long term

    NR are more formal accounts than AR
  22. When you see a "2/10" or an "n/30" in a purchase discount, what does that mean?
    2/10 means a 2% discount (2 outta 10)

    n/30 means the full amount is due in 30 days
  23. In FOB Shipping point
    • The buyer owns inventory when shipped
    • (Pays freight charges)
  24. In FOB Destination
    • Buyer owns inventory when goods arrive
    • (Seller pays fright charges)
  25. What is the formula for Net Sales?
    • Sales made
    • (minus)
    • Sales Returns & Allowances
    • (minus)
    • Sales Discounts
    • (equals)
    • Net Sales
  26. What is the formula for Gross Profit/Margin?
    • Net Sales
    • (minus)
    • Cost of Goods Sold
    • (equals)
    • Gross Profit
  27. What is the Consistancy Principle?
    Use the same accounting methods from period to period
  28. What is the Disclosure principle?
    Report enough information for outsiders to make decisions
  29. What is the Materiality principle?
    Follow accounting rules for significant items
  30. What is the Conservatism principle?
    Exercise caution in financial reporting