Consignee
Receiver of goods owned by another who holds them for purposes of selling them for the owner
Consignor
Owner of goods held by another party who will sell them for the owner.
FIFO
Assumes cost flow in the order incurred
LIFO
Assumes the most recently purchased inventory is first sold
Specific ID
cost of an inventory item as its COGS
Lower Cost or Market
Adjustment made when inventory cost is higher than market price
Rising Costs in LIFO
Report the lowest net income
Rising costs in FIFO
Report the highest net income
Internal controls
All policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies
Sarbanes Oxley Act
Requires internal managers and auditors to document and verify internal controls
Principles of Internal Control
Update and clearly establish responsibilities
Maintain adequate records
Insure assets and bond key assets
Separation of duties
Use devices that improve internal control
Perform regular reviews
Limitations of Internal Control
Human error
Fraud
Collusion
Ethics
Cost benefit constraint
Cash
Includes currency, coins, and amounts on deposit in bank checking or savings accounts
Liquidity
Availability of resources to meet short-term cash requirements
Cash Management
Have cash on hand to meet necessary requirement
Cash payments when due - keep minimum level for operation
Bank Reconciliation
Report that explains the difference between the book (companyy) balance of cash and the cash balance reported on the bank statement, for purposes of computing the adjusted cash balance
Bank Credit Card
...
Department store credit card
A/R
Sales
COGS
Merch inv
Journal Entry for Sales and Inventory
Cash
Credit Card Exp
Sales
Allowance for doubtful accounts
...
% of sales journal entry
Bad debt exp
allowance for doubtful accounts
% of AR journal entry
...
Bad debt (allowance method)
Allowance for doubtful accounts
A/R
Reinstate an account
...
Notes receivable
Promissory note to pay specified amount with stated interest at a certain date by signing
Formula for Interest
Principal x rate (annual) x time (365)
Plant Assets
Tangible assets used in a company's operations that have a useful life of more than one accounting period
Lump-Sum Purchase
Plant assets that are purchased as a group in a single transaction for a lump-sum price
Depreciation
Recognize related expense of the cost of a fixed asset that contributes to revenue
Accumulated depreciation
Contra account that includes total depreciation expense for all prior periods for which the asset was used
Cost
Amount spent to acquire, set up, and make ready for use
Salvage value
estimated price that we believe we can recoup at the end of the asset useful life
Useful life
the service life for out purposes of fixed assets used in operations
Depreciable cost
Cost - salvage value / useful life
Straight line depreciation
Depreciation exp
Accumulated Depreciation
Double declining depreciation
2 x 1/est useful life x book value
Partial Year depreciation
Total cost - est salvage value / total units expected over life of machine
Disposal of depreciated asset
Accumulated depreciation
"Machine"
Natural Resources
Timber, gold, coal, oil, etc
Intangible assets
Non-physical rights to use in operations
Patents
Federal gov grants exclusive right to an invention of new technology
20 years
Copyrights
Music, artwork, literary works
Life of creator + 70 years
Franchises
Company allows someone to use their product
Trademarks
Symbols, songs, phrases that identifies a company or product
Goodwill
Difference between the purchase price of our company and market value of net assets
Amortization
Process of allocating the cost of an intangible asset to expense over its estimated seful life
Book value
Asset's acquisition costs less its accumulated depreciation
Sale of plant asset at no gain or loss
Cash
Accumulated depreciation
Plant Assets
Purchase of land
Land
Building
Cash