Accounting Week Five

1. (a) What are generally accepted accounting principles (GAAP)?

GAAP is the common set of rules used for accounting.

The Financial Accounting Standards Board (FASB) sets the accounting policy. GAAP uses principles that are issued by the FASB.

(b)What bodies provide authoritative support for GAAP?

FASB, Security Exchange Commission

2. What elements comprise the FASB's conceptual framework?

Objectives of financial reporting, Qualitative characteristics of accounting information, Elements of financial statements, Operating guidelines (assumptions, principles, and constraints).

Chapter 8

E8-5 Listed below are five procedures followed by The Beat Company.

1. Several individuals operate the cash register using the same register drawer.

2. A monthly bank reconciliation is prepared by someone who has no other cash responsibilities.

3. Ellen May writes checks and also records cash payment journal entries.

4. One individual orders inventory, while a different individual authorizes payments.

5. Unnumbered sales invoices from credit sales are forwarded to the accounting department every four weeks for recording.

Instructions

Indicate whether each procedure is an example of good internal control or of weak internal control.

If it is an example of good internal control, indicate which internal control principle is being

followed. If it is an example of weak internal control, indicate which internal control principle is violated.

Use the table below.

Procedure IC Good or Weak? Related Internal Control Principle

1. weak Establishment of Responsibility

2. good Segregation

3. weak Physical, mechanical, electronic

4. good Independent Internal Verification

5. weak Documentation procedure

Chapter 15

E15-1 Financial information for Blevins Inc. is presented below.

December 31, 2009 December 31, 2008

Current assets $125,000 $100,000 25000 25%

Plant assets (net) 396,000 330,000 66000 20%

Current liabilities 91,000 70,000 21000 3%

Long-term liabilities 133,000 95,000 38000 4%

Common stock, $1 par 161,000 115,000 46000 4%

Retained earnings 136,000 150,000 14000 9%

Instructions

Prepare a schedule