SMALL BUSINESS EXAM 2
Expenses are the value given up to obtain something that the owner wants
False
Formal summaries of content of an accounting systems records of transactions are called financial instruments
False
The first step in the budgeting process is
Forecast your future sales
In the lease agreement signed by Arthur Fraser, a _____ clause exempts him from paying any restitution in case he causes accidental damage on the property.
Hold harmless
Arbitration
Is a dispute resolution process held instead of court cases in which both sides present their case to a legal professional
Financial leverage
Is a measure of the amount of debt relative to total investment
Productivity
Is the ratio measure of how well a firm does in using its inputs to create outputs
procedure
Is the series of steps and activities required to complete a process
Disadvantage of a corporation
It incurs relatively high incorporation fees and high taxes
Four steps to structure a negotiation to achieve a winning solution for you and the other party
Prepare, position, propose, and pounce
Variance analysis
Process of determining the effect of price and quantity changes on revenues and expenses
Co-insurance requires
That an owner carry insurance equal to a stated minimum percentage of the market value of their property
Income Statement
The characteristics that sometimes make the income statement hard to understand also provide temptation to "fudge" the numbers
Using computers
Today's biggest risk to most businesses
advantage of sole proprietorship
Unique tax advantages
What country is one of the most litigious societies in the world
United States
Acquisition cost
When determining the cost of capital asset, the _____ is the sum of everything that you spend to acquire and prepare the asset for its first productive use
Inventory valuation
determination of the amount of assets held by the firm for sale or production
master budget
A comprehensive budget is also refereeing as
Receivables
A florist purchases her flowers on credit. A customer, takes 8 bouquets and promises to pay within two weeks. This exchange is termed
Making exchanges
According to the definition provided by the US Dallas Federal Bank is one of the primary purposes of money?
Debt to asset ratio
Better when it is a lower number
Cash flow from investing
Cash that can be obtained from stocks, bonds, land, buildings, or equipment that a business has
demand deposit
Checking and savings accounts are most common forms of?
Unemployment insurance
Collected by the IRS and state agencies as a percentage of tax upon payroll
Example of a cash equivalent
Commercial paper
Bearer
Commercial paper is issued to be paid to the _____ of the note, and thus is fully transferrable
Exclusive rights given to the creator of a literacy or artistic work to make use of that work is called a
Copyright
OSHA (Occupational Safety and Health Administration)
Created to enforce safety in the workplace
Managerial Accounting
Accounting method that is specifically intended to be used for planning, directing, and controlling a business
Activity-Based cost estimates
Accounting method which assigns costs based on the different types of work a business does in order to sell a particular product or service
Permanent accounts
Accounts of assets, liabilities, and owners equity, excluding accounts for revenues and expenses.
Insurable value is defined as
Amount of an asset for which a company will write an insurance policy
Profit
Amount that revenues exceed expenses=
Benefit of leasing
An asset can be leased at a very low down payment
Separation of Duties
An employee at a store is required to handle store displays and also ensure that all the sales records tally at the end of each business day. However he committed fraud by recording fake sales and then keeping the products to himself.
General partnerships are similar to limited partnerships in that:
Both dissolve when their respective partnership mix changes
Accounting Equation
Concepts have roots in Mesopotamians who lived and kept records 5,000 years ago
OSHA act
Defined "low hazard" industries are exempt from the record keeping requirements of the regulations
Book value
Describes the difference between the original acquisition cost of capital assets and the amount of depreciation expense that has been recognized to date.
Tax credits
Direct reductions in the amount of taxes that must be paid, dependent upon meeting some legal criteria.
Payroll records
Ensures that employment taxes are kept current
Documenting the operations of your business
Every business does not have to be extensively documented
What argument would be helpful in deflecting vicarious liability
Independent contractor argument
Profits
Information that is useful in predicting when and how much you may collect
Someone who uses intellectual property without the permission of owner is referred to as a
Infringer
Walter Bradham, the owner of bradham corporation muddled his personal finances with his business accounts, following a suit into the financial irregularities at bradham corporation, a court subjected the court subjected the corporation to the decision of piercing the veil. Which of the following course is the court most likely to take in this case?
It will dissolve the corporation into a sole partnership under Bradham
Balance sheet
It's values are considered as historical values
The business entity idea
Juan has an accounting philosophy according to which he keeps the loans borrowed from the business separate from the loans he takes from banks for his own purposes.
demand deposits
Make up most of the non currency cash which is available immediately
Leverage ratios
Measure the relative risk that a business setback could cause bankruptcy
Gross margin ratio
Measures the percentage of sales revenue available to pay operating costs and to provide profits after paying for inventory
Profits are not:
Money
Life insurance
Most common kind of coverage on key persons of a business
True about trade name
Most states allow several firms to use the same trade name, as long as the firms are in different lines of business
Theft insurance
Normally included in insurance on physical assets
Current Ratio
Ratio used to estimate the liquidity of a business
Accounts Receivable
Records provision of credit to customers
Fictitious name filling
Refers to the filling made with a state in which the business operates disclosing the trade name or assumed name of the business along with the owners of the business
Equipment
Refers to the machinery, tools, or materials used in the performance of the work of a business
Capital budgeting
Refers to the process of deciding among various investment opportunities to create a specific spending plan
Cash accounting
Regardless of your businesses size, the one essential element of an accounting system is ______ that is accurate, easy to use, and tracks all checks written and all deposits made
Depreciation
Regular and systematic reduction in income that transfers asset value to expense over time
Fidelity bonds
Repay employers for losses caused by dishonest or negligent employees
Julia recently set up a factory that manufactures shoes. To ensure that her business complied with the basic OSHA regulations:
She must provide medical examinations for all her employees
Setting up your accounting system
The actual task of setting up an accounting system is quite easy if you understand accounting a bit.
Optimum stocking level
The amount of inventory that results in the minimum cost, when considering the cost of lost sales resulting from running out of stock, the number of units sold per day, and the number of days required to receive inventory
Brendon wants sue Fitness Ace, a leading provider of fitness equipments, for negligence. He approaches Arthur Bailey Group, a law firm, which has good experience in handling product liability claims for victims of exercise equipment failure. Which of following would be true if the attorney charges Breton using a retainer?
The attorney would take monthly fee and additional fees if circumstances change
Implication of the bounded rationality models of management is that:
The more information available to be included into the decision process, the less efficient that process will be.
When using internal audits to manage risk
The owner Shiism provide sufficient authority to the auditor to ensure that he or she can accomplish the goals of the audit
When using internal audits to mange risk
The owner should provide sufficient authority to the auditor to ensure that he or she can accomplish the goals of the audit
Insuring the property of a business
The value of the historical significance of a building often cannot be insured
Financial a small business
There are several resources available for financing start ups
Advantage of corporations
They are better equipped in raising large amounts of money
acquisition cost
Total cost of obtaining an asset, including such costs as purchase price, transportation, installation, testing, and calibrating in order to ready it for its first productive use.
Adverse possession occurs when an owner of real property does not enforce property rights and allows a non-owner to use the property as if it were his or her own.
True
Borrowing money for capital investment enhances the potential for higher rates of return for the owners
True
Identifying risks is the first task to be completed before a comprehensive insurance program can be developed for a business
True
In managing risk from violation of tax regulations, small business owners should make paying taxes their first financial priority
True
Patents are essentially monopolies granted to inventors by the US government giving patent owners the exclusive rights to make, use, or sell that invention for a certain period of time
True
Risk from loss of key personnel and former employees setting up competition against your business can be managed by negotiating employment contracts with those key employees
True
The total cost of keeping inventory is the sum of the cost to buy the inventory, the cost to store, protect, and maintain inventory, and the cost of making an order to purchase inventory.
True
The total liability issue in general partnerships is similar to that of sole proprietorships
True
Gaming the payment process
using methods to appear to be paying bills on time, when in fact payment is being delayed or avoided