COA Financial Management & Budgeting Flashcards

A capital expenditure (CapEx) differs from an operating expenditure (OpEx) because CapEx:

Answer: Involves purchasing long-term assets rather than day-to-day expenses

Capital expenditures are investments in long-term assets (like equipment or buildings), while operating expenditures cover routine day-to-day business costs.

In the context of office procurement, the three-way match process verifies that:

Answer: The purchase order, receiving report, and vendor invoice all agree

The three-way match is an internal control that compares the PO, the goods receipt document, and the vendor invoice to prevent payment errors or fraud.

Which financial ratio measures how quickly a business can pay its short-term liabilities with its most liquid assets?

Answer: Quick ratio

The quick ratio (cash + marketable securities + receivables divided by current liabilities) measures immediate short-term liquidity, excluding inventory.

An accrual in accounting means:

Answer: Revenue or expense is recorded when earned or incurred, regardless of cash flow

Accrual accounting records revenues when earned and expenses when incurred, not necessarily when cash is exchanged, providing a more accurate financial picture.

What is the primary purpose of an internal audit in an office environment?

Answer: To evaluate and improve the effectiveness of internal controls and processes

Internal audits assess whether financial controls, compliance procedures, and operational processes are functioning effectively and identify areas for improvement.

Cost-benefit analysis in office decision-making is used to:

Answer: Compare the expected costs of an action against its anticipated benefits

Cost-benefit analysis evaluates whether the projected benefits of a decision or investment outweigh its estimated costs, supporting informed management choices.