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154 Cards in this Set
- Front
- Back
Key Verification |
An input device that requires two keyings of the same data with the keystrokes matching for the data to be accepted into the system |
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Focus for processing |
Processing of transaction files, reports, and records is accurate and complete |
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run-to-run totals |
from one process to another. computer process. add totals from one process to another |
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Beneford's law |
look for errors or fraud based on mathematical pattern frequencies |
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processing test data |
a series of test transactions that have both valid and invalid transactions to test the way the processing behaves |
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integrated test facility |
the test transactions separate from the regular transactions. they come out before the financial statements.
employees are unaware |
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parallel simulation |
auditor compares results from regular program to results from a similar, separate program |
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timed reorder |
goods are always ordered on a specific schedule. quantities can be the same or can vary |
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reorder point |
a minimum stock level is set up and the order is done when the minimum is reached |
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transaction processing systems (TPS) |
the way information flows through systems when a sale occurs. records, summarizes, and reports |
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3 categories of sales transactions |
1) sales processes, including ordering, delivery, and billing 2) sales returns 3) cash collection (depositing money, updating A/R) |
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price list |
entire list of pre-established and approved prices for each product |
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pick list |
shows quantities and descriptions of items ordered. these items are what should be picked from the warehouse |
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packing slip |
lists all items that should be included in a shipment |
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bill of lading |
terms of the agreement between the company and the carrier |
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shipping log |
chronological listing of shipments that allows management to track the status of sales and to answer customer inquiries regarding order status |
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sales journal |
special journal that contains sales transactions. periodically, this amount is posted to the general ledger. |
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5 internal control activities |
1) authorization of transactions 2) segregation of duties 3) adequate records and documents 4) security of assets and documents 5) independent checks and reconciliations |
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authorization of transactions |
specific people should have specific duties, and they should only perform those duties. specific ways of authorizing transactions, such as customer signature, should be in place |
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common independent checks and reconciliations for sales |
-verification of information in the sales journal and on the invoices
-reconciliation of A/R detail with invoices and general ledger -reconciliation of inventory records with actual quantities of product on hand |
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Risky sales processes that flag a need for controls |
-frequent price changes -estimated pricing -large volume of transactions -consignments -shipping from another location |
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receiving log |
chronological sequence of all returned items |
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receiving report |
source document that shows the quantity and condition of all items received from returns |
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credit memorandum |
a document from the seller to the buyer stating the amount to be credited (A/R) to the buyer's account from a return |
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journal of credit memos |
to keep track of all credit memos issued |
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sales allowances |
a credit to the customer's account due to a defective or late product. this requires a lot of controls because no goods are usually returned. |
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remittance advice |
documentation accompanying payment that identifies the customer account number and invoice to which the payment applies |
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cash receipts journal |
special journal that records all cash collections. this is sent to a cashier along with the checks so the bank deposit can be prepared |
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3 separations for internal control |
authorization, recording, and custody |
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separation of duties for cash receipts |
-those who handle cash should not have access to accounting records or bank reconciliations. -those with IT authority should not have access to accounting or cash -those with access to the subsidiary ledger should not have access to the general ledger |
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checks and reconciliation for cash collections |
-surprise checks by someone who does not ordinarily deal with cash -bank deposits compared with cash receipts journal -reconcile cash accounts with bank statements -deposit dates should be checked against bank statements |
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e-commerce systems |
incorporate electronic processing of sales-related activities over the Internet |
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electronic data interchange (EDI) |
communicate sales documents electronically with a standard business format |
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point of sale (pos) |
process sales at a cash register in retail stores |
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business process reengineering (bpr) |
-purposeful and organized changing of business processes to make the processes more efficient -aligns business processes with IT systems -improves efficiency and effectiveness |
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advantages to e-commerce |
-reduced cost from paperwork and tasks -shorter sales cycle -increased accuracy and reliability -increased market (online) |
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risks of e-commerce |
-unauthorized access -invalid data entered by customers -incomplete audit trail -hardware errors -viruses -hackers -risks to customers: private information |
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repudiate |
customer claims a transaction was not made by them. -controls to authorize users and make sure users are real |
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redundant server system |
-ensures that the system is available to not lose sales -requires maintaining one or more computers as a backup in case the main server goes down |
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American national standards institute (ansi) |
developed standard formats for the usual documents needed in a sales process that help make EDI more streamlined |
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header data |
part of ANSI standards that contain information about the file or transmission being sent. header identifies the beginning and end of a particular transaction data set |
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trailer data |
part of ANSI standards that contains data about the file or transmission and identifies the end of a particular transaction data set |
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labeling interchanges |
part of ANSI standards that identify the type of transactions in the set, such as sales invoices |
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data segments |
part of ANSI standards that include the actual data within the invoices, such as quantities and prices |
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value added networks (VANs) |
companies that use EDI usually do not communicate directly and may use a third party to reduce costs. VANs are the third party communication that also translates and encrypts EDI data and authenticates users -many companies use the internet to reduce cost savings even more by not having to pay the third party fees |
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advantages of an EDI system |
-reduction of data keying and elimination of entry errors -cost savings from less data keying and postage -time savings -shorter order cycle= less inventory hold time -better customer service |
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encryption |
coding of data that makes data unreadable to those without the encryption key |
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transaction logging |
IT system automatically produces a log of users and the actions they undertake within the IT system. |
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control totals |
subtotals of selected fields for an entire batch of transactions. ex: quantity ordered |
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acknowledgement |
a reply that echoes the data control totals. this can reduce the risk of erroneous or invalid EDI data in transactions |
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channel stuffing |
intentionally persuading a customer to buy more than needed, which stuffs more product into the channel |
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leaving sales open |
moving a sales cut off period to include sales that should be included in a subsequent period |
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common carrier |
how companies receive their goods. trucking, rail, or plane |
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3 parts of purchasing system |
1) purchasing 2)returns 3) cash disbursement |
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purchase requisition form |
documents the need and request that specific items and quantities be purchased. This must be authorized by a designated person |
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purchase order (PO) |
document issued to a seller by a buyer that indicates products, quantities, and prices for products/services the seller will provide |
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purchases journal |
chronological listing of all POs issued to vendors |
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blind purchase order |
includes information from the PO, but omits price and quantity. forces independent check of item quantity and quality |
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bill of lading |
details of all items included in a delivery. receiving clerk should sign to verify reciept |
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packing slip |
shows quantities and descriptions of items included in the shipment. does not usually include prices |
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receiving report |
a detail of the contents and condition of the receipt |
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receiving log |
sequential listing of all receipts |
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cutoff |
the date for the end of the accounting period. liabilities and receipts must be recorded in the same period |
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accounts payable subsidiary ledger |
detail of amounts owed to each vendor. a file of outstanding invoices is also usually kept |
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debit memo |
document that identifies the items beings returned. Shows that the company will debit (reduce) their A/P that is owed to the seller |
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cash management |
careful oversight of cash balances, forecasted cash payments, and forecasted cash receipts to insure that adequate cash balances exist to meet obligations |
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documents required for cash disbursements |
1) purchase order: valid order placed 2) receiving report: quality goods received 3) invoice: billed items are correct |
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remittance advice |
tear-off part of a check that has an explanation of the reasons for payment, such as invoice number |
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cash disbursements journal |
chronological listing of all payments. like a check register |
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dual signature |
two people must sign a check to reduce fraud and/or error |
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three-way match |
matching of a purchase order to the related receiving report and invoice |
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business process reengineering |
organized change in business processes for the purpose of improving efficiency and effectiveness |
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automated matching |
computer software technique in which the computer software matches an invoice to its related purchase order and receiving report -all files must be online or in a database -items/quantities/prices must match -checks for math errors and previous payments -select most advantageous payment date |
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evaluated receipt settlement (ers) |
invoiceless system -receipt of goods is carefully evaluated and then if it matches the purchase order, the obligation will be settled -less safety due to lack of manual procedures |
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vulnerability testing |
examining the system to determine the adequacy of security measures and to identify security deficiencies |
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penetration testing |
intentionally attempting to circumvent IT system access controls to determine whether there are weaknesses in any controls |
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intrusion detection software |
alerts an organization to hacking or unauthorized use of the system or network |
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RAID |
redundant array of inexpensive disks. maintains one or more disk drives that mirror each other |
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e-payables |
electronic invoicing and payables |
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electronic invoice presentment and payment (EIPP) |
electronic invoicing and payables systems -Internet, using web browsers |
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procurement cards (p-cards) |
credit cards the organization gives to certain employees to make designated purchases -makes purchasing easier -small dollar purchases, such as supplies or maintenance, travel |
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four primary functions of corporate governance |
management oversight internal controls financial stewardship ethical conduct |
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Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness of purchase transactions? |
Are prenumbered purchase orders, receiving reports, and vouchers used, and are the entire sequences accounted for? |
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which of the following controls is not normally performed in the accounts payable department? |
unused purchase orders and receiving reports are accounted for -this would allow them to purchase and record the purchase |
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payroll processes |
policies and procedures that employees follow in acquiring and maintaining human resources, capturing and maintaining employee data, paying employees, and recording the cash and payroll liabilities and expenses |
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fixed asset processes |
policies and procedures involved in purchasing property, capturing and maintaining relevant data about the assets, paying for and recording the assets, recording depreciation, and accounting for losses and gains |
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what is the human resources department responsible for? |
-maintaining records of jobs and employees -tracking vacancies -recruitment -personnel department: keeps records of: hiring/contract/interview reports/wage/personal info |
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organization chart |
a map of the jobs and reporting relationships of the company. -only top branches of the company |
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time sheet |
record of hours worked by an employee for a specific payroll period -updated daily |
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payroll register |
accumulation of all payroll data -complete listing of salary or wage detail for all employees |
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payroll voucher |
authorizes the transfer of cash from the company's main cash account to the payroll account -transfer carried out by cash disbursements dept |
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payroll disbursements journal |
-listing of all paychecks written -all checks are in order -total amount of paychecks should support the total cash transferred to the payroll account |
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paymaster |
person who distributes checks. should not have access to payroll or custody of cash and should be independent of supervisors to make sure the checks are issued to current employees |
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authorization of transactions: payroll |
-dept sup verify hours and make sure no fake/retired employees -pay rate adjustments -only authorized signatures on checks |
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segregation of duties: payroll |
-human resources department separate from payroll and record-keeping -no access to signed checks or cash account for employees -independence paymaster |
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adequate records and documents: payroll |
-personnel files and payroll register -tax forms -prenumbered checks and separate bank account |
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security of assets and documents |
-access to personnel files only designated persons -access to payroll cash only to paycheck signers -blank payroll checks locked with physical controls |
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independent checks and reconciliation |
-# hours on timesheets match payroll register -time sheets match production -payroll register reconcile to general ledger -bank statement for payroll account |
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3 phases of fixed asset process: |
acquisition, continuance, and disposal |
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capital budget |
financial plan detailing all of the company's investments in fixed assets and other investments -some companies require large outlays of money be included here |
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fixed asset subsidiary ledger |
detailed listing of the company's fixed assets, divided into categories -should have: acquisition date, costs, tag numbers, useful life estimates, salvage values |
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fixed asset continuance phase |
the processes required to maintain accurate and up-to-date records regarding fixed assets throughout their useful lives. -update cost data for improvements -update estimates -adjust for depreciation -keep track of physical location of assets |
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depreciation schedule |
record detailing the amounts and timing of depreciation for all fixed asset categories except land and CIP |
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four steps for disposal of fixed asset |
1) depreciation updated to the recorded date of disposal 2) remove assets from the fixed asset subsidiary ledger 3) depreciation removed from the schedule and the fixed asset subsidiary ledger 4) gains/losses computed |
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3 steps for purchasing a fixed asset |
1) investment analysis 2) comparison with capital budget 3) review and approval by appropriate management |
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segregation of duties: fixed assets |
custody and record keeping, purchasing |
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adequate records and documents: fixed assets |
all normal purchasing documents -fixed asset tag -capital budget |
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security of assets and documents: fixed assets |
insurance and preventative maintenance -physical controls: expensive items |
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independent checks and reconciliation: fixed assets |
purchases match capital budget -fixed asset audit -impairment loss check |
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time sheet falsifications |
-exaggeration of work hours -falsification of O/Tor vacation -falsification of sales to get a bigger bonus -overstatement of travel expenses -lying about sick days -lying about an injury to get disability |
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ghost employee |
entity who receives a paycheck, but who does not work for the company -maybe previous employee -friend or relative info -can only happen without proper S.O.D. |
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signs of ghost employee |
-paychecks without adequate withholdings -duplicate address, ss, bank account -payroll expenses over budget -unclaimed paychecks when distributed by independence paymaster |
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earnings management |
-management's flubbing of fixed asset numbers to seem more favorable -extend life of fixed asset: less depreciation each year -salvage value increased -misclassify r&m expense as a capitalization |
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logistics |
logical, systematic flow of resources throughout the organization -well planned and coordinated efforts of many departments -make the most efficient use of resources to support the organization |
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planning |
-part of the logistics function -directs the focus of operations and determines what and how much should be produced |
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research and development |
focuses on product improvement -investigating and developing new products and methods of producing those products -research and test new products or processes before they are used |
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capital budgeting |
plans the capital resources needed to support production -mainly for fixed assets -large amounts of money, so must be carefully planned in advance |
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engineering |
planning the specifications for products that will be manufactured. -prepares the design and determines the parts needed -writes the recipe |
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bill of materials |
form that specifies the components of a product, including what parts and materials are needed -ingredients needed for the recipe |
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operations list |
the entire chain of events that a product goes through, including locations and timing -how to make the recipe |
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scheduling |
plans the timing for production activities, taking into account what is needed and what is available -reduce idle time |
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production orders |
authorize production activities for a particular sales order |
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production schedule |
outlines the specific timing required for a sales order with dates and times -goal is no idle time between production activities -combines info from sales order, bill of materials, and operations list |
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3 resource categories |
1) maintenance and control 2) human resources 3) inventory control |
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maintenance and control |
maintaining capital resources -keeping up with maintenance -working with capital budgeting for replacement -timely repair in case of breakdown |
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human resources |
-responsible for keeping adequate line staff and supervisors -time sheets must be correct so that appropriate costs are assigned to jobs |
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inventory control |
managing and recording the movement of inventory throughout the conversion process. |
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economic order quantities (eoq) |
the most efficient quantity of products to purchase -based on the costs of ordering and maintaining inventory |
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inventory stores function |
the control of raw materials inventory held in storage or in holding areas waiting for processing |
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routing |
the issuance and movement of materials into various production phases |
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routing slip |
when items are removed from the storeroom and taken into production, this is prepared to indicate movement. -documents the descriptions and quantities of materials taken into production for a specified sale or other authorized production activity -"move ticket" |
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inventory status reports |
document the extent of work completed and the resulting level of inventory. -should be monitored so scheduling is aware |
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warehousing |
managing the holding area for finished goods awaiting sale. -well organized so items are easy to find -controlled to prevent theft |
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operations |
major business activity in which a company engages. -day to day performance |
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quality control |
follow-up to production -products are inspected for quality before being moved to the warehouse/shipping |
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rework |
-additional procedures necessary to bring a product up to its required specifications |
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standard costs |
what is expected based on projections of a product's required resources. DM, DL, MOH |
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variances |
the different between the actual and standard cost applied |
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activities in the conversion process that require authorization |
1) initiation of production 2) issuance of materials into production 3) transfer of finished goods to the warehouse |
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computer-aided-design |
may be used to enhance the engineering function |
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materials resource planning (MRP) |
automated scheduling and planning of production and moving of materials |
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mrp-II |
expansion of mrp. considers all manufacturing resources |
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enterprise-resource planning (erp) |
expansion of mrpII. integrate all conversion processes into one single software program, as well as purchasing, A/P, H/R, and payroll |
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computer integrated manufacturing |
-the most advanced form of computer conversion processes -integrates all functional conversion processes, but also integrates financial and cost accounting functions. |
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absorption costing |
inclusion of both variable and fixed costs into the determination of unit costs -fraud: overproducing |
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administrative processes |
transactions and activities that either are specifically authorized by top managers or are used by managers to perform administrative functions -investment of excess funds -issuance of capital stock |
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capital |
funds used to acquire the long-term capital assets of an organization -long term debt or equity |
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source of capital processes |
those processes to authorize the raising of capital, execute the raising of capital, and properly account for that capital |
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underwriter |
third party that contracts to bring new securities issues to the market |
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investment processes |
authorize, execute, manage, and account for investments of excess funds |
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special journal |
established to record specific types of transactions -regular and recurring transactions -sales journal |
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subsidiary ledgers |
maintain the detail information regarding routine transactions -accounts receivable |
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general journal/general ledger |
nonroutine transaction, such as sales of stock -at the end of the period, you must ensure that all transactions have been posted to the general journal |
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journal voucher |
for manual accounting systems -something sent to the general ledger department from a subsidiary department to authorize the posting of transactions to the general ledger. must be signed |