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