Mortuary Management 1 Final Exam Review

Corporate Advantages

-Can have representative management -Ease of raising large amounts of capital -Legal entity separate and distinct from its owners as individuals - The owner's liability for the firm's debt is limited to their investment in it

Partnerships Advantages

-Easy to form -Can use ideas and plans of more than one person -Obtains financial resources from more than one person

Corporate Disadvantages

-Impersonal -High incorporation fees and high taxes -Burdensome reports and statements required by government(s)

LLC Disadvantages

-Liability for debts and accidents is placed on the business and the owner as well -The owner's home, stocks, savings, and personal property may be lost in the event of litigation

Sole Proprietorship Disadvantages

-Limited Capital -Difficulty in obtaining credit -Unlimited liability from firm's debts

Sole Proprietorship Advantages

-Secrecy -Unique Tax Advantages -The owner doesn't have to share profits

LLC Advantages

-Simple to set up, no forms to file -Relatively easy to maintain once started -The owner and the firm are one and the same

Partnerships Disadvantages

-Unlimited liability for debts of the firm -Each partner is responsible for the acts of every other partner -An impasse may develop if the partners become incompatible

The posting at EOM from the Sales Journal to the General Journal includes:

1. At the end of month the total is posted to Accounts Receivable (debit) and Sales (credit) in the general ledger 2. The sales journal is totaled at the end of the month 3. In the general ledger we record the date, the initials of the journal, the page of the sales journal and appropriate debit or credit.

Two Primary Goals of Due Diligence:

1. Attempt to find any wrongdoing 2. Attempt to find inefficiencies, unnoticed opportunities, wasted and mismanagement

To make a correction before posting, you must:

1. Draw a line through the mistake/incorrect line 2. Draw the correct information 3. Initial next to the correction

When attempting to find any wrongdoing, what should you consider?

1. Why is the owner selling? 2. Fraud committed by the owners or managers 3. Misrepresentations made by the sellers 4. Missing information

2/10 and n/30 means:

2/10: 2% discount paid within 10 days n/30: net due within 30 days

Legal Entity

A being, human or nonhuman, such as a corporation, that is recognized as having rights and duties, such as the right to own property.

LLC (Limited Liability Company)

A business structure that protects business owners from personal liability for the company's debts.

Earnings Valuation Method

A common method of valuation is based on the idea that the actual value of a business lies in the ability to produce revenue in the future

Trademark

A distinctive word slogan or image that identifies a product or service business' origin.

Patent

A grant by the US government to an inventor for an idea that is new, useful, and nonobvious, giving the inventor the exclusive right to make, use, or sell his or her idea.

Sole Proprietorship

A non-registered, unincorporated business run solely by one individual proprietor with no distinction between the business and the owner. The owner of the sole proprietorship is entitled to all profits but is also responsible for the business's debts, losses, and liabilities.

Market Value Method

A valuation method used to determine the appraisal value of a business, intangible assets, business ownership interest, or security by considering the market prices of comparable assets or businesses that have been sold recently or those that are still available.

The accounting cycle takes place in a period of time called the:

Accounting period

Which of the following are a component of the final income statement? - Net sales-Cost of Goods Sold=Gross Profit - Gross Profit-Operating Expenses=Net Income from Operations - Net Income from Operations+Other Income-Other Expenses=Net Income

All of the above

When recording from the Sales Journal to the Accounting Receivable Subsidiary Ledger, which of these are true? -The information on the invoice is recorded in the sale journal. -As soon as possible we update the accounts receivable subsidiary ledger. -The accounts receivable subsidiary ledger shows us the outstanding balance at any moment in time.

All of the above are true

Copyright

An exclusive right given to the creator of a literary or artistic work to make use of that work for business purposes

When the closing process is complete, the accounting equation will be reduced to:

Assets= Liability + Ending Capital

Which endorsement consists of a mere signature and is the LEAST secure?

Blank Endorsement

In the ledger, how are we able to determine the balance of an account?

By determining the difference between debits and credits

Paying cash is recorded in the special journal known as the:

Cash Payments journal

Receiving cash from any source is recorded in the special journal known as the:

Cash Receipts journal

Discounted Cashflow Methodology

Cashflows that have been reduced in value because they are to be received in the future

Trade Secret

Confidential information within a company that gives the company a competitive advantage.

The correct formula for straight-line method of depreciation is:

Cost of equipment - residual value/ estimated years of depreciation

When journalizing a transaction, the dollar amount for the _______ is recorded first

Debit

C Corporations

Double taxation of earnings generated by the corporation. The corporation is taxed at the corporate rate, shareholders are taxed on dividends earned at their individual rate.

The ______ is defined as the one who pays money to the payee.

Drawee

The ______ is defined as the one who writes the check.

Drawer

Which of the following are NOT included on the balance sheet section of the worksheet? -Assets -Liabilities -Expenses -Capital

Expenses

_________ is a program you pay into now for others and later others will pay you.

FICA

________ is a federal tax that you pay to support the federal government/

FIT

The shipping method in which the seller pays shipping charges and legal title passes to the buyer when goods reach their destination is known as:

FOB Destination

The shipping method in which the buyer pays shipping charges and legal title passes to the buyer when goods are shipped is known as:

FOB Shipping Point

An accounting period is based on the balance sheet. True/False?

False

The Income Statement only includes assets and liabilities. True/False?

False, it contains revenue and expenses

In the Trial Balance, debits and credits do NOT have to be equal. True/False?

False, they DO have to be equal

Goods transported in bulk by truck, train, ship, or plane are known as __________

Freight

This pay is based on the number of hours you work and your hourly pay:

Gross Pay

Revenue earned from the sale of merchandise to customers is known as:

Gross Sales

The formula for Net Sales is:

Gross Sales - Discounts - SRA

Which is NOT true of overtime pay? -It is a federal law. -Anything over forty hours must be paid as overtime. -It only applies to bimonthly pay periods. -It applies to a seven-day work period.

It only applies to bimonthly pay periods

A calendar year is based on the months of:

January 1st - December 31st

Step Eight in the accounting cycle consists of:

Journalizing and posting closing entries

Corporations

Legal, "artificial" entities that are formed by filling specific documents with a state government.

n/10 EOM means:

No discount, due within 10 days after the end of the month

S Corporations

No taxation of the S Corporation itself. Earnings are passed through to the shareholders who are then taxed individually.

What separates each transaction recorded in the journal?

One blank line

Sales tax _______ is a new account, it is a liability account in the general ledger with a credit balance:

Payable

The _____ is defined as the one to whom the check is payable.

Payee

This inventory system is taken at the end of each accounting period, the cost of unsold goods is calculated:

Periodic

The post closing trial balance lists only ________ accounts in the ledger and their balances after adjusting and closing entries have been posted.

Permanent

This inventory system continually monitors the level of inventory:

Perpetual

When we transfer the transaction from the journal to the ledger the activity is called:

Posting

The sum of the accounts receivable subsidiary ledger will equal the ending balance in accounts receivable, the controlling account in the general ledger. This is known as:

Proving

The ______ account records all merchandise bought for resale. This account has a debit balance and is classified as a cost.

Purchases

The formula for Net Purchases:

Purchases - Purchases Returns and Allowances - Purchase Discounts = Net Purchases

Buying supplies/merchandise on account is recorded in the special journal known as:

Purchases Journal

The account that records a decrease in a buyer's cost is a contra-cost account called the __________

Purchases Returns and Allowances account

The account that records a company's discount is called the __________ account.

Purchases discount

Which endorsement limits the liability of the endorser?

Qualified Endorsement

Withdrawals from the Owner's Equity account do what?

Reduce the balance

Which endorsement prevents the use of the instrument for anything except the stated use?

Restricted Endorsement

The Formal Income Statement lists two amount categories:

Revenue and expenses

Industry Heuristics

Rules of thumb that are commonly used to estimate firm value in relation to some easily observable characteristics of the business.

The sale of merchandise on account (EOM) is recorded in the special journal known as the:

Sales Journal

_________ is a contra-revenue account with a DEBIT balance.

Sales Returns and Allowances (SRA)

An account in the general ledger that accumulates the amount of sales tax owed to the government:

Sales tax payable

Which endorsement designates a particular person to whom the payment is to be made?

Special Endorsement

Which of the following is NOT part of the Worksheet? -Income Statement -Statement of Owner's Equity -Adjusted Trial Balance -Balance Sheet

Statement of Owner's Equity

A Worksheet is completed in what step of the accounting cycle?

Step Five

Preparing a post-closing trial balance occurs in what step of the accounting cycle?

Step Nine

A business transaction occurs and generates documents in what step of the accounting cycle?

Step One

Journalizing and posting adjusting entries occurs in what step of the accounting cycle?

Step Seven

Information being posted or transferred from journal to ledger occurs in what step of the accounting cycle?

Step Three

Analyzing and recording business transactions into a journal occurs in what step of the accounting cycle?

Step Two

A ledger that contains only an account of a single type and is NOT listed on the chart of accounts is known as a

Subsidiary Ledger

When accumulated depreciation is _______ from equipment, the balance of the equipment is then _________

Subtracted; decreased

The normal financial procedures that take place over a period of time are known as:

The accounting cycle

Competition

The act or process of competing; rivalry such as the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms

Net Realizable Value

The amount for the asset will sell, less the cost of selling it. Usually less than the actual cost of replacement

Replacement Value

The cost to acquire and ready an essentially identical asset

Replacement Value Method

The method is based on the principle that a buyer will not pay more for an asset- and a seller will not accept less-than the price of a similar asset. The method can be used to value both an entire business and its individual assets

Due Diligence

The process of thoroughly investigating a business to determine its value.

In Step Four of the accounting cycle, a ________________ is prepared:

Trial Balance

The list of the individual accounts on the worksheet, with their balances taken from the ledger is called the:

Trial Balance

Additional investments by the owner would be added to his or her beginning capital amount. True/False?

True

Adjustments from the worksheet are journalized in the same journal as step 2. True/False?

True

The balance sheet section totals on the worksheet do NOT match the formal balance sheet. True/False?

True

The statement of owner's equity is the name for a merchandise business ad for a service firm. True/False?

True

To make a correction after posting, draw a line through the error and write the correct figure above it, then change the running balance to reflect the corrected posting and initial. True/False?

True

_________ is paid by the employer and based on your job description rated on a scale of 1 to 10, should you become injured on the job.

Worker's Comp

Financial statements are prepared from the:

Worksheet