Internal Controls a company's plan to 1) Safeguard the company's assets, and 2) Improve the accuracy and reliability of accounting information. (4)
Framework for Internal Controls a framework to be used when designing internal controls systems including the control environment, risk assessment, co...
ACG 2021 Exam 2 Chapters 4, 5, 6 & 7
Review Questions and Correct Answers
Internal Controls ✅a company's plan to 1) Safeguard the company's assets, and 2)
Improve the accuracy and reliability of accounting information. (4)
Framework for Internal Controls ✅a framework to be used when designing internal
controls systems including the control environment, risk assessment, control activities
(preventative and detective), monitoring, and information and communication. (4)
Separation of duties ✅authorizing transactions, recording transactions, and
maintaining control of related assets should be separated among different employees.
(4)
Bank reconciliation ✅Matches the balance of cash in the bank account with the
balance of cash in the company's own records. (4)
Deposits outstanding (deposits in transit) ✅cash receipts of the company that have not
been added to the bank's records of the company's balance. (4)
Checks outstanding ✅checks the company has written that have not been subtracted
from the bank's record of the company's balance. (4)
NSF Checks ✅customer's checks written on "non sufficient funds", otherwise known
as "bad" checks. (4)
Direct write-off method ✅recording bad debt expense at the time we know the account
is uncollectible. (5)
Allowance method ✅recording an adjustment at the end of each period to allow for the
possibility of future uncollectible accounts. (5)
Percentage of Aging Calculation ✅using a higher percentage for 'old' accounts than for
'new' accounts when estimating uncollectible accounts. (5)
Percentage of Receivables Calculation ✅Estimate for uncollectible accounts based on
the percentage of accounts receivable expected not to be collected. (5)
Contra Revenue Account ✅an account with a balance that is opposite, or contra, to
that of its related revenue account. (5)
, Net accounts receivable ✅the difference between total accounts receivable and the
allowance of uncollectible accounts. (5)
Net Revenues ✅the company's total revenues less any discounts, returns, and
allowances. (5)
Uncollectible Accounts ✅customers' accounts that no longer are considered
collectible. (5)
FIFO ✅First In, First Out -
BS approach
inventory costing method that assumes the first units purchased (first in) are the first
ones sold (first out). (6)
LIFO ✅Last In, Last Out -
IS approach
inventory costing method that assumes the last units purchased (last in) are the first
ones sold (first out). (6)
Multi-step Income Statement ✅an income statement that reports multiple levels of
income (or profitability). (6)
Gross Profit ✅REV - COGS
The difference between sales revenue and cost of goods sold. (7)
Accelerated Depreciation Method ✅allocates a higher depreciation in the earlier years
of the asset's life and lower depreciation in later years. (7)
Basket Asset Purchase` ✅Purchase of more than one asset at the same time for one
purchase price. (7)
Book Value ✅equal to the original cost of the asset minus the current balance in
Accumulated Depreciation. (7)
Capitalize ✅record an expenditure as an asset. (7)
capitalize when it is...
one time
improves the asset
more significant amount
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