financial accounting exam 3

Internal Controls – a company’s plan to 1.) Safeguard the company’s assets, and 2.) Improve the accuracy and reliability of accounting information.
Separation of duties – authorizing transactions, recording transactions, and maintaining control of related assets should be separated among different employees.
First-in, first-out method (FIFO) – inventory costing method that assumes the first units purchased (the first-in) are the first ones sold (the first-out).
Last-in, first-out method (LIFO) – inventory costing method that assumes the last units purchased (the last-in) are the first ones sold (the first out).
Multi-step income statement – an income statement that reports multiple levels of income (or profitability).
Residual (Salvage) value – the amount the company expects to receive from selling the assets at the end of its service life.
Straight line depreciation calculation – allocated an equal amount of depreciation to each year of the assets service life.
Double declining balance depreciation calculation – a accelerated method that allocates a higher depreciation in the earlier years of the asset’s life and lower depreciation in later years
Intangible asset – long-term assets that lack physical substance, and whose existence is often based on a legal contract.
Net accounts receivable – the calculated difference between total accounts receivable and the allowance of uncollectible accounts.
Net revenues – calculation: total revenues less any discounts, returns, and allowances.
Gross profit – calculation: sales revenue less cost of goods sold.
Book value – calculation: original cost of long-term asset less accumulated depreciation.
Contra revenue account – an account with a balance that is opposite, or contra, to that of its related (companion) revenue account
Allowance for uncollectible accounts – contra asset account representing the amount of accounts receivable that we do not expect to collect. Major category - contra asset, asset; Normal balance - credit; Financial statement - Balance Sheet.
Sales allowance (Contra Revenue) – seller reduction of customers’ balance owed or provision of a partial refund because of some deficiency in the company’s product or service. Major category - contra revenue, revenue; Normal balance - debit; Financial statement – Income Statement.