Accounting Notes

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Accounting Test 2
WE have a problem in valuing inventory when the prices change. (Inventory evaluation system) How we decide to do this can change the profit.
Determining cost of inventory, how much profit did we make? We have to have a value on ending inventory…
Periodic System: counting all physical inventory at the end of the period Perpetual: continual, temporary.
1. The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures. (Points : 2) it stopped management from fraudulent claims 2. |        True 

       False 
|
2. Internal control is enhanced by separating the control of a transaction from the record-keeping function. (Points : 2)|        True 
       False 
|
3. For strong internal control system over cash, it is important to have the duties related to cash receipts and cash payments divided among different employees. (Points : 2)|        True 
       False 
|
4. In preparing a bank reconciliation, the amount of deposits in transit is deducted from the balance per bank statement. (Points : 2)|        True 
       False 
|
5. The bank reconciliation is an important part of the system of internal controls. (Points : 2)|        True 
       False 
|
6. Expenditures from a petty cash fund are documented by a petty cash receipt. (Points : 2)|        True 
       False 
|
7. A compensating balance occurs when a bank may require a depositor to maintain a maximum cash balance. (Points : 2)|        True 
       False 
|
8. The objectives of internal control are to (Points : 2)|        control the internal organization of the accounting department personnel and equipment        provide reasonable assurance that operations are managed to achieve goals, financial reports are accurate, and laws and regulations are complied with        prevent fraud, and promote the social interest of the company        provide control over "internal-use only" reports and employee internal conduct

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9. A bank statement (Points : 2)|
       is a credit reference letter written by the depositor's bank        lets a depositor know the financial position of the bank as of a certain date        is a bill from the bank for services rendered

       shows the activity that increased or decreased the depositor's account balance
|
10. A bank reconciliation should be prepared periodically because (Points : 2)|        the depositor's records and the bank's records are in agreement        the bank has not recorded all of its transactions        any differences between the depositor's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected        the bank must make sure that its records are correct

|
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In Class Quiz;
Which of the following is not an example safeguarding inventory? * Checking the invoice with the person who ordered the item Which are examples of safeguarding inventory?
* Storing inventory in a restricted area
* Physical devices such as cameras or alarms
* Matching receiving documents, purchase orders and vendor invoices The inventory method that assigns the most rent costs to cost of merchandise sold is * LIFO
The inventory costing method that reports the most recent prices in ending inventory is * FIFO
Which of the following is a cost flow assumption method?
* FIFO
Which of the following is an inventory system?
* Perpetual
Under the _____ inventory system, accounting records are continuously updated after each sale? * Perpetual
During a period of rising prices the method of inventory that will result in the greatest cost of merchandise sold is * LIFO (reduce income taxes)

Allowance Method for Reporting Credit Losses
Accounts receivable are reported as a current asset on a company's balance sheet. Since current assets by...
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