ACCT 102 1st EditionExam # 2 Study Guide Lectures: 9-17Lecture 9 (February 13th)Paying with checks: only certain people have the authority to sign the check and checks are ordered by specific check numbers making it easy to tie the transaction to the payment.Petty Cash Fund: Small dollar amounts put into a fund to reimburse employees who have receipts for items they’ve bought with their own moneyBank Accounts: a secure place to keep cash and backed by the federal Government.Bank Reconciliation: serves as a control function by identifying errors. - Differences between cash account balance and bank statement:o Transactions recorded by business but not by the bank Deposit in transit: amount recorded by the business but has not been recorded by the bank. Happens at the end of the month. Outstanding checks: check is issued by the business and has not been cashed yet.o Transactions recorded by the bank but not yet recorded by the business. Interest on bank accounts Band service charges NSF check: a check that has been returned to the company because therewasn’t enough money in their account.o Errors in recording transactions- Preforming a bank Reconciliation:o Start with unadjusted bank balanceo Add deposits in transit and deduct outstanding checkso Then go to unadjusted book balanceo Add collections and interest and deduct bank service charges and NSF checkso Resulting in True cash balanceFraud Triangle:- Opportunity: most control over, don’t give someone the opportunity to commit fraud- Rationalization: justify their fraud; protect family, underpaid, going to pay it back etc.- Pressure: someone pushed them to commit fraud, usually by a corrupt manager or other employee.Lecture 10 (February 18th)Uncollectable accounts expense: - Direct Write off Method: writes off bad debts when they can be specifically identifiedo Not permitted under GAAP- Allowance Method: contra asset account allowance for doubtful accounts is created to offset accounts receivable.o Accounts receivable – allowance for doubtful accounts= net realizable value of receivablesPercent of Revenue Method: credit sales x estimated bad debt percentage= bad debt expensePercent of receivables method: calculates an estimated allowance for doubtful accounts based on accounts receivables.Estimated alliance for doubtful accounts – allowance for doubtful accounts= bad debt expenseFactoring: Sell your receivablesLecture 11 (February 20th)Notes Receivable: involves a formal, written agreement to pay and gives creditor a stronger legal claim. Usually used for big receivables.- Maker: party issuing the note and promising to pay- Payee: party loaning the money and receiving the payments- Principal: original amount borrowed- Issuance Date: date note began- Maturity Date: date note must be paid- Term: amount of time between the issuance date and maturity date- Interest Rate: annual rate of interest that must be paid on the principal- Maturity Value: amount to be paid each due date (principal plus interest) Calculating Interest: Interest= Face Amount x Interest Rate x Fraction of a yearCredit Cards: pays the seller the amount of each sale and charges a service fee. The back then collects the full amount of the sale from the buyer.- Advantages to the sellero Receives the money in a few dayso Avoid bad debto Reduce costs for employeeso Believed that it will increase sales.- Small Businesses: service fees for using credit cards will eat up any profit a small business makes, making it harder for small businesses to use credit cards- Advantages for consumer:o Extra transaction securityo Ability to delay paymentso Good way to build credit- Disadvantages for consumer: o Charge high interest rateso Make it easy to overspendo Quickly create debt that hurts credit scoreDebit Cards: authorizes a bank to make an immediate electronic withdrawal from holder’s bank account.- Advantages for consumer: o Convenience of being accepted at many retailerso No interest or finance chargeso No debt to pay later- Disadvantages for consumer:o Provides less support in case your card is stolen.o Overdraft your bank accounto Fail to contribute to your credit historyLecture 12 (February 23rd)Merchandise Inventory: product available for sale at the end of the year.Beginning inventory + Inventory Purchases – Costs of Goods sold= Ending InventoryInventory Cost flow: Good in inventory may be acquired at different costs- First in First Out (FIFO): older lower priced items are sold first- Last in First Out (LIFO): newer, higher priced items are sold first for tax reasons.- Average Cost: average prices so there is consistent per item prices within a particular sale.Lecture 13 (February 25th)Fixed Asset: an asset that physically exists and used during normal business operations.- Cost of Fixed assets: doesn’t just cost what it is worth but you also pay for shipping, installation etc.Costs after Acquisition: - Revenue Expenditures: ordinary repairs and maitance, everyday small repairs. Recorded as expenses when they incur.- Capital Expenditures: improvements to an asset that affect its long-term value. Increases the assets useful life.Depreciation: Cost of the fixed assets recorded over the life of the asset, reflects the reduction in value. - Annual depreciation Expense= (Asset Cost-Salvage Value) / useful life- Recording Depreciation: book value of fixed asset= cost- Accumulated depreciationLecture 14 (February 27th)Discarding a fixed asset: when a business disposes of an asset but receives nothing in return.- When an asset with no book value is discarded an entry is made to remove it from the companies books.- When an asset that is not fully depreciated is discarded, depreciation for the current period through the date of discard must first be recordedSelling a fixed Asset: if the asset isn’t fully depreciated, then the current period through the date of sale must be recorded. Sale proceeds-book value of fixed asset= Gain/loss on saleLecture 15 (March 2nd) Depletion: allocation of cost for fixed assets such as timber, ore etc. Cost of Resource/ estimated total units of resource. Depletion Charge= unit depletion charge x number of units extractedIntangible Assets: long lived assets that are non-physical goods- Amortization: has a useful life- Patents: a right to items- Copyright: reserves to the right to make money off books music etc. amortization of a copyright is the author’s life plus a little.Financial operations: businesses must