ACCT 2101: Chapter 8
21 Cards in this Set
Front | Back |
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4 primary Expenditure Process Activities
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determined the need for goods/services
select suppliers & order g/s
receive g/s
pay suppliers of g/s
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Which of Expenditure Process Activities are accounting events?
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receive g/s: increase inventory & accounts payable
pay suppliers of g/s: decrease accounts payable & cash
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Special journals
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recurring, frequent transactions (events)
replaces the general journal for these events
purchases on account, sales on account, cash receipts, cash payments
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Subsidiary ledger
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Details regarding specific general ledger accounts
supports, (not replace) general ledger
accounts payable, accounts receivable, inventory
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Merchandising inventories
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inventory purchased to be resold
merchandise inventory account
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Manufacturing inventories
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inventory purchased to be used to make products
direct materials inventory account
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Periodic Inventory Systems
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Determine ending inventory & cost of goods sold at the end of the period
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Perpetual Inventory Systems
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determine ending inventory & cost of goods sold on a continuous basis
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How are inventory activities recorded in a period system?
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purchase: debit purchases, credit accounts payable
return or allowance: debit accounts payable, credit purchase returns & allowances
freight or insurance on purchases: debit freight-in, credit accounts payable (or cash)
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Net Price method
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purchases & purchase returns/allowances are recorded net of the available discount
discounts lost are recorded separately
could be used with period or perpetual
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Gross price methods
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purchases & purchase returns/allowances are recorded at the gross price
discounts taken are recorded separately
could be used with period or perpetual
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How to solve net price method/perpetual
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solve for purchase: price * % of discount
then solve return returned price * % of discount
then subtract purchase from return to find payment w/ discount
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Gross price/perpetual
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find purchase price
then return price
then subtract accounts payable by (purchase-return)
then decrease cash by discount (payment * % discount)
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Basic Flow of info in the Payroll Process
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Employees record time worked on time cards, factory records time worked on time tickets
timekeeping compares time cards & time tickets
payroll records time worked, deductions, etc.
accounts payable approves payroll & notifies cashier
cashier pays employees
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Difference b/w Gross Pay & Net Pay from employer's pov?
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gross pay: salary & wage expense
net pay: cash outflow to employees
withholdings: liabilities to pay the entity to which the funds belong
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Salary/Wage Expense
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expense incurred from using employees in an attempt to generate revenue
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Payroll tax expense
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expense incurred due to having employees (matching FICA & unemployment taxes)
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When are expenses (& inventory) recognized?
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when incurred, regardless of when paid
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How are expenditure process activities communicated to users?
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income statement: discounts lost, loss on inventory, other expenses, cost of good sold
Balance sheet: ending balance of inventory, other assets/liabilities
stat. of cash flows: cash paid for inventory & other expenditure process items
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How can we calculate cash payments?
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use T-account format (know how to analyze balance sheet accounts)
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How to solve an operating expense
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subtract prepaid insurance begin balance from insurance expense then add to insurance end balance to get cash paid for insurance
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