Chapter 8 Test- Business Basics
Analyzing all costs involved in creating a product is called ____.
product costing
Cash reserves in a business are often used to ____.
repair equipment
a business owned by one person.
sole proprietorship
evidence that a business transaction happened. Examples include check stubs, invoices, and receipts.
source document
a tool to increase or decrease each account that is affected by a transaction.
t-account
The difference between what a business pays for a product and the price it charges to sell that product to customers is ____.
the markup
A balance sheet is a primary financial statement.
true
A good costing method to use for milk is the first-in, first-out method.
true
A profit is the amount of money earned above the amount spent to keep the business operating.
true
An amount entered on the right side of a T account is called a credit.
true
Business owners often use reserve capital to grow their businesses.
true
the amount of money owed to the creditors of a business.
accounts payable
the total amount of money owed to a business by customers.
accounts received
Detailed information about the products and/or services offered to customers.
description of products/services
A person who follows his or her dreams by assuming the risk of starting a new business is a(n) ____.
entrepreneur
An overall summary of all the sections in the business plan.
executive summary
A periodic inventory system keeps a constant, up-to-date record of merchandise on hand.
false
Financial forecasting is the process of predicting your business's profits.
false
Taking physical inventory is unnecessary if a periodic inventory system is in place.
false
Includes profit/loss statement, balance sheet, cash flow statement, and pro-forma statements.
financial statement
a contractual agreement to sell a company's products or services in a designated geographic area.
franchise
Detailed plans for the use of any funds and plans for repayment if a loan is necessary.
funds required/expected uses
The total amount of money an employee makes in a pay period is called ____.
gross earnings
a report of the net income or net loss for an accounting period.
income statement
record of all of the transactions of a business.
journal
a business that operates and pays taxes as a partnership but has limited liability for the owners.
limited liability company
Analysis of the conditions and trends in an industry.
market analysis
Plans for maintaining and building the customer base, the benefits to the customer of choosing the business over competitors', and pricing information, and promotion advertising plans.
marketing plan
Outlines and describes the day-to-day operations of a business.
operating plan
Includes the owner's, resume, background, and work experience.
owner's credentials
a business owned by two or more persons.
partnership
Inventory records are updated only after someone takes a physical count of merchandise with a ____.
periodic inventory system
When total sales equal total costs
break even point
The _________________ is the activities, or steps, that help a business keep its accounting records in an orderly manner.
accounting cycle
The accounting equation is the basis for keeping all accounting records in balance. Which of the following is the accounting equation?
assets - liabilities = owner's equity
a report of the balances of all asset, liability and owner's equity accounts at the end of an accounting period.
balance sheet
Includes the age, history, legal information, structure, and location of the company.
company description
a business organization that operates as a legal entity that is separate from its owners.
corporation
Includes the company name, address information, author, and date prepared.
cover page
Which of the following is not classified as capital in the financial plan?
current