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Accounting Test 2

Ch 4 and 5 terms

a periodic examination of a company's financial statements and the accounting systems, controls, and records that produce them. audits
collection of money by the bank on behalf of a depositor bank collections
a document explaining the reasons for the difference between a depositor's records and the bank's records about the depositors cash bank reconciliation
document showing the beginning and ending balances of a particular bank account listing the month's transactions that affected the account bank statement
a quantitative expression of a plan that helps managers coordinate the entity's activities budget
a budget that projects the entity's future cash receipts and cash disbursements cash budget
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
document instructing a bank to pay the designate person or business the specified amount of money. check
a malicious program that enters a company's computer system by e-mail or other means and destroys program and data files computer virus
the chief accounting officer of a business controller
a deposit recorded by the company but not yet by its banks deposits in transit
system that transfers cash by electronic communication rather than by paper documents electronic funds transfer
mathematical rearranging of data within an electronic file to prevent unauthorized access to information encryption
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
an insurance policy taken out on employees who handle cash fidelity bond
an electronic barrier, usually provided by passwords, around computerized data files to protect local area networks of computers from unauthorized access firewall
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
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
fraud perpetrated by management by preparing misleading financial statements fraudulent financial reporting
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
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
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
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
fraud committed by employees by stealing assets from the company misappropriation of assets
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
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
a check issued by the company and recorded on its books but not yet paid by its bank outstanding check
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
fund containing a small amount of cash that is used to pay minor amounts petty cash
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
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
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
a malicious program that hides within legitimate programs and acts like a computer virus Trojan Horse
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
net sales divided by average net accounts receivable accounts receivable turnover
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
another name for allowance for uncollectible accounts allowance for doubtful accounts
the estimated amount of collection losses allowance for uncollectible accounts
a method of recording collection losses based on estimates of how much money the business will not collect from its customers allowance method
another name for uncollectible account expense bad-debt expense
the party to whom money is owed creditor
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
the party who owes money debtor
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
another name for uncollectible account expense doubtful-account expense
the borrower's cost of renting money from a lender. This is revenue for the lender and expense for the borrower. interest
another name for short term investments marketable securities
the date on which a debt instrument must be paid maturity
the date on which the debtor must pay the note maturity date
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
the amount borrowed by a debtor and lent by a creditor principal
quick ratio another name for acid-test ratio quick ratio
monetary claims against a business or an individual, acquired mainly by selling goods or services and by lending money receivables
investments that a company plans to hold for one year or less. Also called marketable securities. short-term investments
the length of time from inception to maturity term
stock investments that are to be sol din the near future with the intent of generating profits on the sale trading securities
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
Created by: forevermoody
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