Glossary of Accounting-review from 4-6

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What are 2 ways to calculate Net Income?
Revenues - Expenses = NI
Net Sales - COGS= Gross Profit - Expenses = NI
Which statement is Merchandise Inventory listed on?
Balance sheet.
What is category is Merchandise Inventory considered?
Current Asset.
what does FOB mean?
Free on Board
Who pays for transportation for FOB Shipping Point?
Who pays for transportation for FOB Destination?
What does FOB Shipping Point mean?
Buyer accepts ownership when goods depart the seller's place of business.
What does FOB Destination mean?
Ownership of goods transfers to buyer when the goods arrive at the buyers place of business.
What are characteristics of FIFO?
assings lowest amount of COGS - yields highest gross profit and net income
What are characteristics of LIFO?
assigns the highest amount to COGS - yields lowest gross profit and net income. Gives tax advantage.
During a time of inflation, which inventory method shows lowest inventory value?
During a time of inflation, which inventory method shows most recent prices?
During a time of inflation, which inventory method shows highest prices?
What is specific identification good for?
Items with vin numbers, like cards, fridges, tvs...
Which inventory method do you always know the cogs?
which inventory method do you know the value at the end of the month?
Which statement does COGS go on?
Which statement does Sales go on?
Which statement does sales discounts go on?
What category is COGS under?
What category is Sales under?
What category is sales discounts under?
Contra revenue
How is inventory turnover calculated?
IT= COGS/(beg in-ending inv)
How is days' sales in inventory calculated?
Days= (ENding inventory/COGS) X 365
How to calculate ending inventory?
Goods available for sale - COGS = EI
What is the purpose of Internal control?
protect assets, ensure reliable accounting, promote efficent operations, and urge adherence to company policies.
what are the principles of internal control?
1. establish responsiblities
2. maintain adequate records
3. insure assets and bond key employees.
4. Separate recordkeeping from custody of assets
5. Divide responsiblity for related transactions
6. Apply technological controls.
7. Perform regular and independant reviews.
How is cash controled?
1. handling cash is seperate from recordkeeping of cash
2. cash receipts are promptly deposited in a bank
3. cash disbursements are made by check.
what is a voucher system?
a set of procedures and approvals designed to control cash disbursements and acceptance of obligations
what do all bank statements include?
1. beg. of period balance
2. checks and other debits
3. deposits and other credits
4. end of period balance
What is the purpose of a bank reconcilliation?
1. outstanding checks
2. deposits in transaction
3. deductions for uncollectible items and services
4. additions for collections and interest
5. Errors
If there is a CR to cash over and short is it revenue or expense?
If there is a DR to cash over and short is it revenue or expense?
When is the bank reconillation finished?
Once entries are made into the journal

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