CPS Financial Management and Budgeting Flashcards

When a check is written but has not yet cleared the bank, it appears on the bank reconciliation as a(n):

Answer: Outstanding check

An outstanding check is one that has been recorded in the company's books but has not yet been presented to the bank for payment.

Which cost control technique compares actual performance against a standard or benchmark to identify inefficiencies?

Answer: Variance analysis

Variance analysis compares actual costs to standard or budgeted costs to highlight deviations that may indicate inefficiencies or require management attention.

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

Answer: Acquires or improves long-term assets and is depreciated over time

Capital expenditures involve purchasing or improving long-term assets whose cost is spread over their useful life through depreciation, unlike operating expenses expensed immediately.

A purchase requisition differs from a purchase order in that a purchase requisition is:

Answer: An internal request to the purchasing department to buy goods or services

A purchase requisition is an internal form requesting the purchasing department to procure goods or services, while a purchase order is the external document sent to the vendor.

Which financial principle states that a business's financial records should be kept separate from the personal finances of its owners?

Answer: Business entity principle

The business entity principle (also called the economic entity assumption) requires that a business's financial transactions be recorded separately from the owner's personal finances.

When processing a large volume of invoices, a professional secretary should prioritize payment of invoices offering:

Answer: Early payment discounts before their deadline

Capturing early payment discounts (such as 2/10 net 30) reduces company costs and should be prioritized before their discount window expires.