Chapter 5
A customer gets a discount on an item they bought on credit that they are dissatisfied with but gets to keep the merchandise.
What is a purchase allowance?
The earliest goods are also the first to be sold.
What is FIFO cost flow assumption?
Safeguard assets, accurate information, compliance with laws and regulations
What are objectives of internal controls?
The total cost of merchandise sold during the accounting period.
What is cost of goods sold?
Ownership of goods transfers when the goods reach the buyer.
What is FOB destination?
Opportunity, Financial Need, Rationalization
What are the three main motivators of fraud?
Sales Revenue-Cost of Goods Sold= ____________
__________- Operating Expenses= Net Income
What is Gross Profit?
The cost flow method that produces the highest net income during times of inflation
What is FIFO?
prepared periodically to explain the difference between cash reported on the bank statement and the cash balance on company’s books.
What is a bank reconciliation?
2% discount if paid within 10 days, otherwise net amount
due within 30 days
What is 2/10 n/30?
Raw materials, work in process, finished goods
What are inventory accounts for a manufacturing company?
Small payments required in most
companies for items such as postage,
courier fees, repairs and supplies
What is petty cash fund for?
Quick Assets/ Current Liabilities
What is acid-test ratio?
The net amount a company expects to receive from sale of inventory
What is net realizable value?
An __________ entry on the bank
statement indicates a decrease in the company's account.
What is a debit memo?