Chapter 8 Test- Business Basics

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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


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