Internal Controls
A system used to monitor and control business systems to ensure that nothing goes wrong.
What is internal control?
Short term highly liquid assets that are readily converted to cash and will be converted to cash shortly.
What are cash equivalents?
Principal x Rate x Time
What is the formula for the calculation of interest?
These are the 4 possible inventory costing methods.
What are specific identification, FIFO, LIFO, and weighted average?
This long term asset is never depreciated.
What is land
The law that requires publicly held companies to have a system of internal control.
What is Sarbanes Oxley?
This is the account used when the amounts in the cash register do not agree to the cash register tape only by a small amount.
What is cash over and short?
The term used to describe an account receivable that the company never collects.
What is bad debt?
Net sales - Cost of goods sold
What is gross profit?
(Cost - salvage value)/useful life
What is the calculation for straight line depreciation expense?
This is the one circumstance where internal controls are not effective.
What is collusion?
This is the activity that compares the cash balance per the bank to the cash balance per the books.
What is bank reconciliation?
Debit bad debt expense, credit allowance for doubtful accounts.
What is the entry used to record the company's estimate of bad debts for the period.
2/10, n/30
What is the customer receives a 2% discount if paid within 10 days, otherwise the entire amount is due in 30 days?
This is the amount that you estimate that you will receive once you are done using the asset.
What is salvage value?
The phrase used to describe the control where the person who has access to the asset does not also have access to the records.
What is separation of duties?
This is the term used to describe a check that has not yet been presented to the bank for payment.
What is an outstanding check?
The method of estimating bad debts by using the formula: Current period sales x estimated bad debt percentage
What is the percentage of sales method?
The shipping term used to describe when title to goods is transferred at the time the customer receives the goods.
What is FOB Destination?
The terminology used when recording the usage of a natural resource.
What is depletion?
Opportunity, Pressure & Rationalization
What is the fraud triangle?
This is the term used to describe a deposit that has been recorded in the accounting records but has not yet been deposited to the bank account.
What is deposit in transit?
One of 2 ways that the company can convert their receivables to cash
What is pledging receivables or selling receivables?
In a period of rising prices, the inventory method that results in the lowest amount of net income.
What is LIFO?
Cost minus accumulated depreciation
What is Net Book Value?