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BFOR 400-Exam 2 Questions And Correct Answers 100% Verified
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BFOR 400-Exam 2 Questions And CorrectAnswers 100% Verified
Accounting - ANSWER the tracking of business activities in a particular time period
Reasons for accounting - ANSWER 1) Internally- facilitates decision making, tracking of
company performance
2) Externally- individuals with some type of relationship with the organization may need
to know the financial information like: investors, creditors, potential vendors, etc
Accounting System - ANSWER comprises the methods by which companies record
transactions and financial activities; includes tracking of business activities (through
the initial entry into the company's records), classification of info, and presenting the
info to the end user
Accrual basis - ANSWER revenue is recognized when it is earned, and the expenses are
recorded when they are incurred; includes 2 major areas: 1) accounts receivable & 2)
accounts payable
Cash bias - ANSWER the receipt of funds into an entity & the payment for goods and
services; revenue is recorded when it is received & expenses are recorded when why
are paid; cash basis is not widely used for financial statement reporting purposes
3 Levels of reporting financial statements - ANSWER 1) compilations
2) reviews
3) audits
Compilations - ANSWER outside accountants simply format and report management's
,results and balances consistent with Generally Acceptable Accounting Principles
(GAAP); simply financial reporting, and provide the lowest level of assurance at the
lowest cost
Reviews - ANSWER review of the financial statements, accounts provide the same
reporting as for compilations, but also perform inquiry and analytical review procedures
over the info; no opinion is expressed on the financial statements
Audits - ANSWER audited financial statements are reported in accordance with GAAP,
but detailed audit procedures are performed on the financial results and balances, and
also on the internal controls of the organization being audited;
provide the highest level of assurance at the greatest cost
5 Accounting Cycles - ANSWER 1) Sales and accounts receivable
2) Purchases and accounts payable
3) Human resources and payroll
4) Inventory and storage/warehousing
5) Capital expenditures
Sales and accounts receivable - ANSWER -Fundamental concept of any business
involved getting business (sales) from customers, billing for those goods or services,
and then making sure the accounts receivable are collected
-Revenue from sales appears on IS
-Accounts receivable appears on BS
-Cash sales and collections on accounts receivables directly affect the cash balance,
which is a balance sheet item
Sales and Accounts Receivables - Internal controls to minimize asset misappropriation
or theft - ANSWER -Audit trail
-Approval process: credit approval, write-off approval, approval for shipment of
, products, etc.
-Independent checks on the system: at a minimum, include independent preparation of
bank and other account reconciliations, supervision
Purchases and accounts payable - ANSWER -This cycle affects the BS
-Cash, inventory, and prepaid expenses; equipment, land, building, and accumulated
depreciation; accounts payable and accrued expenses, etc
-Also affect IS
-Cost of goods and the sale of goods (results in the company's gross profit)
-Expenses such as administration, travel, advertising, taxes, etc
Human resources and payroll - ANSWER -this aspect of the cycle includes recruitment,
retention, and remuneration of employees, and the related underlying data of time
records, expense reports, and other matters
-Cash and payroll taxes payable on the BS
-Salaries/payroll, payroll taxes, benefits, travel, and entertainment, and other related
expenses on the IS
Human Resources and Payroll: Safeguards for reducing risk - ANSWER -Segregation
between the individuals who manage human resources, such as adding, changing, and
terminating employees within the payroll system, and the individuals who process
payroll
-Proper documentation of timesheets, time cards, etc.
-Need for approvals related to hiring and firing employees, overtime, travels, etc.
-Safeguards are essential for preventing 'ghost employees', etc.
Inventory and storage/warehousing - ANSWER -Encompasses the purchasing function
as it relates to the company's inventory, but it also includes the warehousing of products
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