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26 Cards in this Set
- Front
- Back
When is the Merchandise Inventory account updated in a perpetual system?
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Throughout the period (with each transaction)
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Is it necessary to take a physical count at the end of the period in a perpetual system and for what purpose?
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Yes, to verify the ending balance
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What level of control does the perpetual inventory system provide?
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High level
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Types of goods historically associated with the perpetual system?
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High value, Low volume goods
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When/how is Cost of Goods Sold determined in a perpetual system?
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Cost of Goods Sold is determined and recorded with each sale.
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How many journal entries are needed for each sales transaction in a perpetual system?
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2 Entries:
One recordes revenue earned Another records expense account Cost of Goods Sold and removes it from inventory |
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How do you record purchases of inventory from a supplier in a perpetual system?
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Debit merchandise inventory
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How is freight paid on inventory purchased from a supplier [FOB shipping point] treated in a perpetual system?
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Considered part of cost inventory and debited to Merchandise Inventory account
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How are discounts taken on goods purchased from a supplier treated in a perpetual system?
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Credited to Merchandise Inventory account, reducing the cost of the inventory
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How are returns and allowances on goods that we purchased from a supplier treated in the perpetual system?
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Credited to the Merchandise Inventory account and reducing the cost of the inventory
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When is the merchandis inventory account updated in the periodic system?
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Only at the end of the period
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Is it necessary to take a physical count at the end of the period and for what purpose in the periodic system?
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Yes, physical count necessary to OBTAIN ending inventory
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What level of control does the periodic inventory system provide?
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Low level
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Types of goods historically associated with the periodic system?
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LOW-value, high volume of goods
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When/how is cost of goods sold determined in a periodic system?
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Determined through a calculation done at the end of the period.
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How many journal entries are needed for each sales transaction in the periodic system?
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1 Entry
An entry records Revenue earned |
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How do you record purchases of inventory from a supplier in the periodic system?
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Debit the purchases account
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How is freight paid on inventory purchased from a supplier [FOB shipping point] treated in periodic system?
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Discounts from supplier are accumulated in the purchase discounts account
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How are returns and allowances on goods that we purchased from a supplier treated in a periodic system?
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Accumulate in purchase returns and allowances
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What are the six principles of internal control
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Establishment of responsibility
Documentation procedures segregation of duties Independent internal verification Physial Mechanical and Electronic controls Other Controls |
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One person should be assigned the responsibility for a specific task
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Establishment of Responsibility
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Business documents should provide evidence that transactions and events have occured. Documentation includes prenumbered documents and accounting for all docs
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Documentation Procedures
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There should be a division of work or separation for runctions and this is accomplished by assigning related activities to different individuals, and not allowing individuals to have physical custody of an asset.
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Segregation of Duties
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This principle involves the review, comparison, and reconciliation of data prepared by other employees
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Independent Internal Verification
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Includes the use of locks, alarms, passwords, tv monitors and other devisces to protect the assets and the accounting records of the company
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Physical, Mechanical, and Electronic Controls
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Bonding of employees, required vacations and rotation of duties are examples of:
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Other Controls
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