Cost of goods sold is reported on the income statement and the balance sheet. The consistency principle requires a company to use the same accounting methods period after period. Errors in inventory valuation only affect the current period's records and financial statements. A sales journal is used for recording cash sales. Two common subsidiary ledgers are cash receipts and cash disbursements.
Collusion occurs when a person embezzles money from a company and tries to hide the evidence.
The Petty Cash account is a separate checking account used for small amounts. A contingent liability is an obligation to make a future payment if an uncertain future event occurs. The use of an allowance for bad debts is required under the materiality principle. Plant assets are intangible assets used in the operations of a business. Because depreciation is based on predictions of salvage value and useful life, depreciation is an aestimate.