Ch 4 and 5 terms
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| a periodic examination of a company's financial statements and the accounting systems, controls, and records that produce them. | audits
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| collection of money by the bank on behalf of a depositor | bank collections
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| a document explaining the reasons for the difference between a depositor's records and the bank's records about the depositors cash | bank reconciliation
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| document showing the beginning and ending balances of a particular bank account listing the month's transactions that affected the account | bank statement
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| a quantitative expression of a plan that helps managers coordinate the entity's activities | budget
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| a budget that projects the entity's future cash receipts and cash disbursements | cash budget
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| investments such as time deposits, certificates of deposit, or high-grade government securities that are considered so similar to cash that they are combined with cash for financial disclosure purposes on the balance sheet | cash equivalent
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| document instructing a bank to pay the designate person or business the specified amount of money. | check
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| a malicious program that enters a company's computer system by e-mail or other means and destroys program and data files | computer virus
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| the chief accounting officer of a business | controller
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| a deposit recorded by the company but not yet by its banks | deposits in transit
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| system that transfers cash by electronic communication rather than by paper documents | electronic funds transfer
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| mathematical rearranging of data within an electronic file to prevent unauthorized access to information | encryption
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| identifying data that is not within "normal limits" so that managers can follow up and take corrective action. Used in operating and cash budgets to keep company profits and cash flow in line with management's plans | exception reporting
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| an insurance policy taken out on employees who handle cash | fidelity bond
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| an electronic barrier, usually provided by passwords, around computerized data files to protect local area networks of computers from unauthorized access | firewall
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| an intentional misrepresentation of facts, made for the purpose of persuading another party to act in a way that causes injury or damage to that party | fraud
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| the three elements that are present in almost all cases of fraud. These elements are motive, opportunity, and rationalization on the part of the perpetrator. | fraud triangle
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| fraud perpetrated by management by preparing misleading financial statements | fraudulent financial reporting
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| a way to account for petty cash by maintaining a constant balance in the petty cash account, supported by the fund (cash plus payment tickets) totaling the same amount | imprest system
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| organizational plan and related measure adopted by an entity to safeguard assets, encourage adherence to company policies, promote operational efficiency, and ensure accurate and reliable accounting records | internal control
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| a fraudulent scheme to steal cash through misappropriating certain customer payments and posting payments from other customers to the affected accounts to cover it up. Caused by weak internal controls | lapping
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| a system of handling cash receipts by mail whereby customers remit payment directly to the bank, rather than through the entity's mail system | lock-box system
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| fraud committed by employees by stealing assets from the company | misappropriation of assets
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| a "hot" check, one for which the payer's bank account has insufficient money to pay the check. These are cash receipts that turn out to be worthless. | nonsufficient funds (NSF) check
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| a budget of future net income. This projects a company's future revenue and expenses. It is usually prepared by line item of the company's income statement. | operating budget
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| a check issued by the company and recorded on its books but not yet paid by its bank | outstanding check
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| a special set of characters that must be provided by the user of computerized program or data files to prevent unauthorized access to those files. | password
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| fund containing a small amount of cash that is used to pay minor amounts | petty cash
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| creating bogus web sites for the purpose of stealing unauthorized data, such as names, addresses, social security numbers, bank account, and credit card numbers | phishing
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| an optional attachment to a check that indicates the pare, date, and purpose of the cash payment. This is often used as the source documents for posting cash receipts or payments | remittance address
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| in a large company, the department that has total responsibility for cash handling and cash management. This includes cash budgeting, cash collections, writing checks, investing excess funds, and making proposals for raising additional cash when needed. | treasurer
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| a malicious program that hides within legitimate programs and acts like a computer virus | Trojan Horse
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| ratio of the sum of cash plus short term investments plus net current receivables to total current i. tells whether the entity can pay all its current liabilities if they come due immediately. Also called the quick ratio. | acid-test ratio
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| net sales divided by average net accounts receivable | accounts receivable turnover
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| a way to estimate bad debts by analyzing individual accounts receivable according to the length of time they have been receivable from the customer | aging-of-receivables
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| another name for allowance for uncollectible accounts | allowance for doubtful accounts
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| the estimated amount of collection losses | allowance for uncollectible accounts
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| a method of recording collection losses based on estimates of how much money the business will not collect from its customers | allowance method
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| another name for uncollectible account expense | bad-debt expense
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| the party to whom money is owed | creditor
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| ratio of average net accounts receivable to one day's sales. Indicates how many day's sales remain in accounts receivable waiting collection | days sales in receivables
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| the party who owes money | debtor
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| a method of accounting for bad debts in which the company waits until a customer's account receivable proves uncollectible and then debits uncollectible account expense and credits the customers accounts receivable | direct write off method
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| another name for uncollectible account expense | doubtful-account expense
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| the borrower's cost of renting money from a lender. This is revenue for the lender and expense for the borrower. | interest
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| another name for short term investments | marketable securities
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| the date on which a debt instrument must be paid | maturity
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| the date on which the debtor must pay the note | maturity date
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| computes uncollectible account expenses as a percentage of net sales. Also called income statement approach because is focuses on the amount of expense to be reported on the income statement | percent-of-sales method
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| the amount borrowed by a debtor and lent by a creditor | principal
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| quick ratio another name for acid-test ratio | quick ratio
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| monetary claims against a business or an individual, acquired mainly by selling goods or services and by lending money | receivables
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| investments that a company plans to hold for one year or less. Also called marketable securities. | short-term investments
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| the length of time from inception to maturity | term
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| stock investments that are to be sol din the near future with the intent of generating profits on the sale | trading securities
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| cost to the seller of extending credit. Arises from failure to collect for credit customers. Also called doubtful-account expense or bad-debt expense | uncollectible-account expense
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