Accounting Final Exam Flashcards
(37 cards)
What is gross pay?
Total amount earned
What is net pay?
Total amount less deductions
Name 3 deductions from gross pay for the average employee.
State tax, Fed. tax, Medicare, Social sec.
An employee pays their share of state unemployment tax. T/F
False, the employer pays into unemployment
What is the purpose of worker’s compensation?
To protect workers injured on the job through a slush fun paid by employers.
What is a W-2 form?
A W-2 is a breakdown of employee’s earnings for a 1 yr. period.
The gross pay for 1 week for all employees is $240,000. FWT is $72,000, SWT is $12,000, social security and medicare withheld is $18,000. Make a journal entry to accrue this payroll.
Salaries expense 240,000
FWT payable 72,000
SWT payable 12,000
Soc. Sec/Medicare 18,000
Salaries payable 138,000
To record salaries+deductions
Name 3 payroll expenses borne by and employer.
Employment insurance, health ins., workers comp., unemployment.
What is a payroll register?
It will list every employee along w/ their gross pay, deductions, and net pay.
Under what circumstance might an employee have gross wages but no federal tax withheld.
If they are claiming enough dependencies to not have to pay taxes, don’t make enough money to pay tax, or are being 1099’d
What are short-term notes payable.
Formal legal document - due within 1 yr.
Why are unearned revenues a liability?
If work is not performed then money is owed back.
A note has the following attributes: Maker, payee, date, due date, interest rate, and principal. What do each of these terms mean?
Maker - person who owes. Payee - person owed. Date - date the note is made Due date - date fee owed Interest rate - interest rate that will be payed. (I=Principal x Rate x Time) Principal - amount
Can a note payable have both a current portion and a long-term portion? Explain.
Yes, it can be treated much like a loan both in short and long term sense. Ex. mortgage.
Accounting is based on recording actual transactions and actual numbers. Can management recorded estimated amounts on the books and still produce credible financial statements?
Yes, as long as the info is liable and estimate-able.
Name the 2 conditions which must be present to recognize (record) a Contingent Liability on the books.
- The liability must be probable.
2. Is the amount of money owed estimate-able.
How do you calculate working capital?
Current Assets-Current Liabilities
How do you calculate the working capital ratio?
3:1 - 3 is the current assets;1 is the current liabilities.
How do you calculate the quick ratio?
Cash + Marketable securities + Accounts receivable/ Current liabilities.
Is 3:1 or 2.99:1 current ratio better? Why?
3:1 because you have 3 dollars to every 1 dollar owed.
Accounting Definition:
Accounting is an information system which provides reports to users about the economic conditions and financial activities of a business or organization
Accounting equation:
Assets = Liabilities + Net worth
Net Worth =
Assets - Liabilities
Long term assets
(non current assets) Assets use to operate a business and are not expected to turn into cash or be used up within the next 12 months unless they are sold for reasons other than the day to day operations of the business.
