ACCT 200: Chapter 6
41 Cards in this Set
| Front | Back |
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internal controls-definition
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-actions and policies that a company uses to make sure that everything is right
-safeguarding assets is most important
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internal controls-action
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-use of competent, reliable employees
-appropriate assignment of responsibility and detail
-transactions are clearly authorized
-provision for the separation of duties
-performance of both internal and external audits
-maintenance of proper documentation and records
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use of competent, reliable employees
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-force employees with money responsibilities to take vacations
-makes it easier to detect any wrong doing
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appropriate assignment of responsibility and detail
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-clear set of duties
-each important activity is specifically designated
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transactions are clearly authorized
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-checks over a certain amount must be approved by a manager before being accepted
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provision for the separation of duties
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-requiring at least two employees to be involved in any transaction
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performance of both internal and external audits
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-comparing records of the company with actual circumstances
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maintenance of proper documentation and records
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-make sure that records are correct
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human resource management
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-focuses on the individuals who work for the business
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available cash
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-single most important asset for a company
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cash equivalents
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-short term investments that are highly liquid and extremely safe
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signature cards
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-list kept by the bank
-list of signatures of individuals authorized onto account
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deposit tickets
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-provide records of dates and amounts of deposits
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checks
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-authorize bank to pay cash from an account to another person or entity
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bank statement
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-describes all transactions during a certain period
-sent to the owner of an account
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reconciling the bank statement
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-one of the easiest and most important internal control methods
-process of explaining why numbers are different
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deposits in transit
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-deposits of cash and checks that the company records at the time of receipt before forwarding to the bank
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outstanding checks
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-checks which are written and recorded by the company
-have not been presented to the bank yet
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non-sufficient funds
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-NSF
-checks that were deposited by the company but which the bank was unable to collect money for
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fidelity bond
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-pays the company for losses due to theft by covered employees
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cash short/over account
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-account that is debited or credited for the difference between the amount indicated on the cash register tape and the amount actually in the drawer
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petty cash fund
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-small amount of cash kept by a single person
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imprest systems
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-systems that are controlled by having a clearly defined maximum level
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accounts/tradereceivables
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-result from purchases of goods or services on account that are paid off in a relatively short time
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other receivables
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-interest or tax refunds are often listed in a catch-all classification
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uncollectible account expense
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-significant amount of credit sales are never paid
-credit that is never collected
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direct write-off method
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-easiest way to account for bad debt expense
-write it off directly
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allowance method
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-estimating the amount of bad debt
-ties the revenue generated from the credit sales to the expenses associated with bad debt from those sales
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percentage of sales technique
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-bad debt is estimated as a percentage of credit sales during that period
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gaining of accounts receivable
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-classifies each individual customer's receivable based off how long it has been since the customer made the original purchase
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promissory note
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-creates a note receivable account
-promise to pay between the entity who owes the money (maker) and entity who is owed (payee)
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maker of the note
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-person who makes the promissory note
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payee of the note
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-person who is owed the money from the promissory note
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principle amount
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-original amount owed by the maker
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interest
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-money accumulated from the original amount of a promissory note
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maturity/due date
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-when the last payment is due
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interest equation
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principal x annual interest rate x time (in years) = interest
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discounting note
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-selling the note to the bank for cash
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turnover ratio
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-how many times per year an income statement item passes through the balance sheet item
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accounts receivable turnover ratio
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-how many times the company collects money per year
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collection period
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-how many days the company collects money
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ACCT 200: Chapter 6