Test 3 Review - Internal Control, Depreciation, and Monetary Policy

Flashcards created to aid in the review of internal control processes, depreciation methods, and monetary policy as covered in the lecture notes.

What is the primary purpose of internal control in a business?

To protect its assets, keep accurate records, and ensure everything is legal.

What do strong internal controls help to prevent?

Errors, fraud, and theft.

What is a key feature of cash receipts management?

Ensuring all incoming money is properly recorded and safely handled.

What is the goal of cash payments management?

To ensure money is only spent on real, approved business expenses.

What is a cash budget?

A plan that shows how much cash a business expects to receive and spend in a certain period.

What is depreciation?

The way the cost of an asset is spread out over time as it's used.

What is the difference between capital expenditures and revenue expenditures?

Capital expenditures improve the asset or extend its life, while revenue expenditures are regular maintenance or repairs expensed right away.

What is depletion accounting?

Similar to depreciation, but for natural resources; the cost of the resource is spread out as it's used up.

What is amortization?

Spreading out the cost of intangible assets over time.

What is the main function of monetary policy?

Managing money and interest rates.

What are asset bubbles?

When things are sold for way more than they're worth.

What is a negative real shock?

A sudden event that hurts the economy's ability to produce goods or services, such as a natural disaster.

What is radical disinflation?

A sudden and sharp drop in inflation that can cause higher unemployment in the short run.

What role did the Federal Reserve play after the 9/11 attacks?

It lent a lot of money to banks to keep the financial system running and restore market confidence.