accounting test 2

Ratio used to assess a company's ability to settle its current debts with its most liquid assets; defined as quick assets (cash, short-term investments, and current receivables) divided by current liabilities

Reduction in the price of merchandise granted by a seller to a buyer when payment is made within the discount period

Cost of inventory sold to customers during a period; also called; cost of sales

Notification that the sender has credited the recipient's account in the sender's records

Time period that can pass before a customer's payment is due

Description of the amounts and timing of payments that a buyer (debtor) agrees to make in the future

Notification that the sender has debited the recipient's account in the sender's records

Time period in which a cash discount is available and the buyer can make a reduced payment

Abbreviation for end of month;  used to describe credit terms for credit transactions

abbreviation for free on board; the point when ownership of goods passes to the buyer; FOB shipping point (or factory) means the buyer pays shipping costs and accepts ownership of goods when the seller transfers goods to carrier; FOB destination means the seller pays shipping costs and buyer accepts ownership of goods at the buyer's place of business

Expenses that support the operating activities of a business

Gross margin (net sales minus cost of goods sold) divided by net sales; also called gross profit ratio

Net sales minus cost of goods sold; also called gross margin

Goods a company owns and expects to sell in its normal operations

Catalog (full) price of an item before any trade discount is deducted

Goods that a company owns and expects to sell to customers; also called merchandise or inventory

Entity that earns net income by buying and selling merchandise

Income statement format that shows subtotals between sales and net income, categorizes expenses, and often reports the details of net sales and expenses

Method that records the cost of inventory purchased but does not continuously track the quantity available or sold to customers; records are updated at the end of each period to reflect the physical count and costs of goods available

Term used by a purchaser to describe a cash discount granted to the purchaser for paying within the discount period

Intermediary that buys products from manufacturers or wholesalers and sells them to consumers

Term used by a seller to describe a cash discount granted to buyers who pay within the discount period

Expenses of promoting sales, such as displaying and advertising merchandise, making sales, and delivering goods to customers

Inventory losses that occur as a result of theft or deterioration

Income statement format that includes cost of goods sold as an expense and shows only one subtotal for total expenses

Information outside the usual accounting records; also called supplemental records

Reduction from a list or catalog price that can vary for wholesalers, retailers, and consumers

Intermediary that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers

Principle that prescribes the less optimistic estimate when two estimates are about equally likely

Receiver of goods owned by another who holds them for purposes of selling them for the owner

Owner of goods who ships them to another party who will sell them for the owner

Principle that prescribes use of the same accounting method(s) over time so that financial statements are comparable across periods

Estimate of number of days needed to convert inventory into receivables or cash; equals ending inventory divided by cost of goods sold and then multiplied by 365; also called days' stock on hand

Method to assign cost to inventory that assumes items are sold in the order acquired; earliest items purchased are the first sold

Procedure to estimate inventory by using the past gross profit rate to estimate cost of goods sold, which is then subtracted from the cost of goods available for sale

Number of times a company's average inventory is sold during a period; computed by dividing cost of goods sold by average inventory; also called merchandise turnover

Method for assigning cost to inventory that assumes costs for the most recent items purchased are sold first and charged to cost of goods sold

Required method to report inventory at market replacement cost when that market cost is lower than recorded cost

Expected selling price (value) of an item minus the cost of making the sale

Method for estimating ending inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at retail

Method for assigning cost to inventory when the purchase cost of each item in inventory is identified and used to compute cost of inventory

Method for assigning inventory cost to sales; the cost of available-for-sale units is divided by the number of units available to determine per unit cost prior to each sale that is then multiplied by the units sold to yield the cost of that sale

Report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement

Bank report on the depositor's beginning and ending cash balances, and a listing of its changes, for a period

Checks that the bank has paid and deducted from the depositor's account

Includes currency, coins, and amounts on deposit in bank checking or savings accounts

Short-term, investment assets that are readily convertible to a known cash amount or sufficiently close to their maturity date (usually within 90 days) so that market value is not sensitive to interest rate changes

Income statement account used to record cash overages and cash shortages arising from errors in cash receipts or payments

Document signed by a depositor instructing the bank to pay a specified amount to a designated recipient

Another name for a cash disbursements journal when the journal has a column for check numbers

Committee of Sponsoring Organizations of the Treadway Commission (or COSO) is a joint initiative of five private sector organizations and is dedicated to providing thought leadership through the development of frameworks and guidance on enterprise risk management, internal control, and fraud deterrence.

Measure of the liquidity of receivables computed by dividing the current balance of receivables by the annual credit (or net) sales and then multiplying by 365; also called days' sales in receivables

Lists items such as currency, coins, and checks deposited and their corresponding dollar amounts

Deposits recorded by the company but not yet recorded by its bank

Expenses resulting from not taking advantage of cash discounts on purchases

Use of electronic communication to transfer cash from one party to another

Method of recording purchases at the full invoice price without deducting any cash discounts

All policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies

Itemized record of goods prepared by the vendor that lists the customer's name, items sold, sales prices, and terms of sale

Document containing a checklist of steps necessary for approving the recording and payment of an invoice; also called check authorization

Resources such as cash that are easily converted into other assets or used to pay for goods, services, or liabilities

Availability of resources to meet short-term cash requirements

Method of recording purchases at the full invoice price less any cash discounts

Checks written and recorded by the depositor but not yet paid by the bank at the bank statement date

Small amount of cash in a fund to pay minor expenses; accounted for using an imprest system

Principles prescribing management to establish responsibility, maintain records, insure assets, separate recordkeeping from custody of assets, divide responsibility for related transactions, apply technological controls, and perform reviews

Document used by the purchasing department to place an order with a seller (vendor)

Document listing merchandise needed by a department and requesting it be purchased

Form used to report that ordered goods are received and to describe their quantity and condition

Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances accounting and control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws

Includes the signatures of each person authorized to sign checks on the bank account

Buyer of goods or services

seller of good or services

Internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded

Journal (referred to as book of original entry) in which all vouchers are recorded after they have been approved

Procedures and approvals designed to control cash disbursements and acceptance of obligations

Amounts due from customers for credit sales; backed by the customer's general credit standing

Measure of both the quality and liquidity of accounts receivable; indicates how often receivables are received and collected during the period; computed by dividing net sales by average accounts receivable

Process of classifying accounts receivable by how long they are past due for purposes of estimating uncollectible accounts

Contra asset account with a balance approximating uncollectible accounts receivable; also called Allowance for Uncollectible Accounts

Procedure that (a) estimates and matches bad debts expense with its sales for the period and/or (b) reports accounts receivable at estimated realizable value

Accounts of customers who do not pay what they have promised to pay; an expense of selling on credit; also called uncollectible accounts

Method that records the loss from an uncollectible account receivable at the time it is determined to be uncollectible; no attempt is made to estimate bad debts

Charge for using money (or other assets) loaned from one entity to another

Entity who signs a note and promises to pay it at maturity

Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses

Prescribes that accounting for items that significantly impact financial statement and any inferences from them adhere strictly to GAAP

Date when a note's principal and interest are due

Entity to whom a note is made payable

Amount that the signer of a note agrees to pay back when it matures, not including interest

Written promise to pay a specified amount either on demand or at a definite future date; is a note receivable for the lender but a note payable for the lendee

Expected proceeds from converting an asset into cash