midterm - chapter 12

Question 1

covers social security and medicare taxes

Answer 1

FICA

Federal Insurance Contributions Act

Question 2

how often employees are paid

Answer 2

pay period

Question 3

identifies customers that made purchases using credit and the status of each account

Answer 3

accounts receivable record

Question 4

amounts owed by the business that will be paid within a year

ex. short term loans from a bank, accounts payable

Answer 4

current liabilities

Question 5

detailed plans for the financial needs of individuals, families and businesses

Answer 5

budget

Question 6

What is the purpose of payroll taxes?

Answer 6

to fund government projects like roads, schools, parks, etc

Question 7

• shows the company’s assets, liabilities and owner’s equity as of a specific date
• a report that lists a company’s assets, liabilities and owner’s equity at a specific point in time

Answer 7

balance sheet

Question 8

all income that a business receives over a period of time; the money the company is making

Answer 8

revenue

Question 9

assets

Answer 9

anything of value that a business OWNS

Question 10

the assets with a lifespan of more than a year

ex. land, buildings, equipment and expensive technology

Answer 10

long term assets

Question 11

budget that plans income and expenses from the beginning of a new business or expansion until it becomes profitable

Answer 11

start up budget

Question 12

liabilities

Answer 12

amounts that a business OWES

Question 13

extra money only available to certain employees

Answer 13

commissions, bonuses, profit sharing

Question 14

what is the accounting equation?

Answer 14

assets = liabilities + owner’s equity

or

assets - liabilities = owner’s equity

Question 15

the result of expenses being greater than income; another term for loss

Answer 15

net loss

Question 16

a report of revenue, expenses and net income or loss from operations for a specific period

Answer 16

income statement

Question 17

employers transfer employees’ net pay electronically directly into their bank accounts

Answer 17

direct deposit

Question 18

employees are either paid a salary or an hourly rate

Answer 18

regular earnings

Question 19

How is profit calculated?

What is the basic financial equation?

Answer 19

Revenue - Expenses = Profit or Loss

Question 20

financial documents that are used to record and analyze the financial performance of a business

Answer 20

financial records

ex. a/p record, a/r record, depreciation record

Question 21

What are the 4 steps in budgeting process?

Answer 21

1. prepare a list of each type of income and expense that will be part of budget
2. gather accurate info from business records and other sources for each type of income and expense
3. create the budget by calculating each type of income, expense and the amount of net income or loss
4. explain the budget to people who need financial info to make decisions

Question 22

• a financial document that identifies the companies from which credit purchases were made and the amount purchased, paid and owed
• payments to other vendors (businesses) that will be paid at a later date

Answer 22

accounts payable

Question 23

cash and those items that can be readily converted to cash such as inventory and accounts receivable

Answer 23

current assets

Question 24

expenses that only happen once in awhile

Answer 24

periodic expense

ex. car repairs, Christmas bonus, car registration

Question 25

a budget that plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable

Answer 25

start up budget

Question 26

a financial document that identifies customers that made purchases using credit and the status of each account; amounts the customers owe the company

Answer 26

accounts receivable

Question 27

What is the purpose of a balance sheet?

Answer 27

* to help determine how business is performing * shows how much the business is worth on the date its prepared

Question 28

What are the 3 types of budgets?

Answer 28

1. start up budget 2. operating budget 3. cash budget

Question 29

a tax paid by BOTH employees and employers to the federal government, it's used to pay for retirement benefits, widows and disability benefits

Answer 29

social security tax

Question 30

* the financial plan for the ongoing operations of the business * covers 3 months, 6 months or a year

Answer 30

operating budget

Question 31

What is shown on income statement?

Answer 31

* revenue * expenses * net income or loss

Question 32

example of payroll taxes

Answer 32

* income tax * state tax * social security * medicare * unemployment tax

Question 33

a tax by the state government on an employee's income; employers withhold this amount each pay period and pay it directly the the state government

Answer 33

state income tax

Question 34

expenses that change every month

Answer 34

variable expenses ex. electric bill, phone bill, food

Question 35

What are the goals of a business budget?

Answer 35

* to determine the sources and amounts of income * to identify the types of expenses and predict their costs * to determine how income will be distributed to cover those expenses * to reward investors if there is a profit

Question 36

only available for hourly employees; 1-1/2 times regular pay rate for hours worked over 40 hours in one week

Answer 36

overtime earnings

Question 37

the result of revenue being greater than expenses; another term for profit

Answer 37

net income

Question 38

What is the purpose of the income statement?

Answer 38

to determine how business is performing

Question 39

What are the main purposes of a business budget?

Answer 39

* anticipate sources and amounts of income for a business * predict the types and amounts of expenses for a specific business activity or the entire business

Question 40

the value of the business after liabilities are subtracted from assets; the value of the owner's investment in the business; what the business is worth

Answer 40

owner's equity

Question 41

a report of revenue, expenses and net income or loss from operations for a specific period; prepared every 6 months or 1 year

Answer 41

income statement

Question 42

the financial record of employee compensation, deductions and net pay

Answer 42

payroll

Question 43

required federal and state payments for each employee

Answer 43

payroll taxes

Question 44

money withheld from employee's paycheck to cover medical insurance costs, retirement plan contributions, dental insurance, etc

Answer 44

payroll deductions

Question 45

* printed with paychecks * shows information for current pay period and cumulative amounts for the year * shows number of hours worked and hourly wage rate or salary amount, vacation or sick days used, each tax withheld, all deductions withheld, etc

Answer 45

earnings report aka pay stub

Question 46

* budget that shows an estimate of the actual money received and paid out for a specific period * covers each week or month * includes sales, rent, electricity, income, etc

Answer 46

cash budget

Question 47

business expenses are greater than income

Answer 47

net loss

Question 48

identifies the companies from which credit purchases were made and the amounts purchased, paid and owed

Answer 48

accounts payable record

Question 49

What information is contained in a payroll record?

Answer 49

employee name, address, social security number, salary or wage info, vacation and sick days, tax info, etc

Question 50

a tax paid by BOTH employees and employers to the federal government and is used to pay for Medicare benefits for citizens 65+ or with certain disabilities

Answer 50

Medicare tax

Question 51

expenses that are the same every month

Answer 51

fixed expenses ex. rent, mortgage, insurance premiums

Question 52

What is shown on balance sheet?

Answer 52

* current assets * long term assets * current liabilities * long term liabilities * owner's equity

Question 53

* things that cost a company money, such as salaries, utilities, insurance, etc * costs of operating a business

Answer 53

expenses

Question 54

What is the difference between gross pay and net pay?

Answer 54

* gross pay is the amount an employee earns BEFORE taxes and deductions are taken out * net pay is the employee's 'take home pay' and is AFTER taxes and deductions are withheld

Question 55

a tax by the federal government on an employee's income; employers withhold this amount each pay period and pay it to the government

Answer 55

federal income tax

Question 56

business debts that will continue for longer than a year ex. loan on land, buildings or equipment

Answer 56

long term liabilities

Question 57

documentation used to process earnings payments and record each employee's pay history

Answer 57

employee payroll records

Question 58

What factors influence income?

Answer 58

* education - college or technical training * number of years of experience * where you live * type of job (entry level or management) * type of company working at

Question 59

the final 'take home pay' once all employee deductions and taxes are taken out

Answer 59

net pay

Question 60

a report that lists a company's assets, liabilities, and owner's equity at a specific point in time; prepared every 6 months or once a year

Answer 60

balance sheet

Question 61

business revenue is greter than expenses

Answer 61

net income

Question 62

a financial document used to identify the amount that assets have decreased in value due to their age and use

Answer 62

depreciation record

Question 63

costs of operating a business

Answer 63

expenses

Question 64

a budget that describes the financial plan for ongoing operations of the business for a specific period of time, typically 1 year

Answer 64

operating budget

Question 65

all income that a business receives over a period of time

Answer 65

revenue

Question 66

the total earnings for an employee during a pay period; includes regular, overtime and commission earnings

Answer 66

gross pay

Question 67

the financial record of employee compensation, deductions and net pay

Answer 67

payroll

Question 68

What are 3 types of expenses?

Answer 68

1. fixed 2. variable 3. periodic