Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Finance Exam 1 > Basic Business and Accounting > Flashcards

Basic Business and Accounting Flashcards

(104 cards)

Start Studying
1
Q

Define Business Ethics

A

The principles and standards that define acceptable conduct in business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Define Social responsibility

A

A businesses obligation to maximize its positive impact and minimize its negative impact on society

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define Ethical Issue

A

An identifiable problem or situation that requires that a person choose from several actions that may be evaluated as ethically right or wrong

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Define loyalty

A

Employer and employee are mutually loyal to each other

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Define veracity

A

Business is conducted in a truthful manner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Define Defined Benefit Pension

A

Starts a retirement and provides typically a monthly amount of money, amount of which is determined through a formula based on numerous factors (length of employment)
Cannot be “out-lived”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Define Defined-contribution programs

A

401-K or Cash Balance Plans
On a monthly basis, employers and employees make a defined amount contribution to a plan that is managed by an insurance company
NO guaranteed income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Veracity was replaced with

A

Profits at all costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Most common ethical problems?

A

Lying
Withholding vital information that could impact a management decision
Abusive/intimidating behavior

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Four Categories of ethical issues?

A

Conflict of interest
Decision maker fairness and honesty
Deceptive communications
Deceptive business relationships

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Define conflict of interest

A

problem occur when a person has to choose whether to advance their own personal interest or those of others

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Define Deceptive communication

A

False or misleading advertising or personnel using deceptive selling techniques eventually anger customers (loss of money)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Define Deceptive business relationship

A

When the company suppliers do not buy into the corporate standard of ethical behavior and engage in behaviors that will eventually impact the services or products provided by the company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Ethical or Unethical choice in business =

A

Individual employee standards and values +
Managers and coworkers influences +
Ethical codes and compliance requirements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

4 dimensions of the nature of social responsibility

A

An economic dimension
A legal dimension
An ethical dimension
A voluntary and philanthropic dimension

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Sarbanes-Oxley Act

A

Mandate the establishment of confidential systems so employees could raise issues of possible unethical accounting practices
Holds CEO and chief financial officer responsible for accuracy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Define Generally Accepted Accounting Principles

A

Rules created so that the same set of procedures are used each time to report transactions and create financial statements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Define Business Entity Concept

A

Business is treated separately from owner’s personal financials

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Define Cost Principle

A

All goods and services purchased by the business are recorded in the financial statements at actual cost even if the owner thinks they are worth more

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Define Continuing Concern Concept

A

Business is established to remain operating using its assets to contiue operation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Define Objectivity principle

A

Amounts used in recording transactions must be supported by objective evidence such as invoices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Define Stable dollar concept

A

We record transactions at the value of the dollar at the time of the transaction and we do not worry about appreciation or depreciation of the buying powder of the dollar

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Define Conservatism

A

Requires that sufficient attention be given to risks taken by the organization and anticipate possible financial losses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Define Matching

A

Attempt to put expenses into the same accounting period as the revenues that caused the expenses to be generated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
**Define Accrual Basis
Need for operating and income statements and cash flow statements Record revenues when they are INCURRED We asign the revenues/expenses to the accounting period in which they were earned and with the expenses that helped generate them
26
**Define Cash Basis
Revenue is reported on the financial statement when it is actually RECEIVED - Used when business do not know what they will be getting paid
27
Define Sole Propietorship
One owner Has to transfer funds or create more net income to increase equity No legal status and doesn't exist legally
28
How do you end a sole proprietorship?
Pay off any debts and end it
29
Bob Smith is the sole owner of Bob Smith Pharmacy and it is listed at the county court house as a sole proprietorship. If Bob should suddenly die, does the business exist by law?
No
30
Advantages to Sole Proprietorship?
No formal federal requirements for establishing the business Owner has complete freedom to establish operating policies, controls and use of money Personal incentive to do well Federal taxes are only those required of the owner as an individual
31
Disadvantages to Sole Proprietorship?
Unlimited personal liability | Ability to acquire a start-up and on-going capital is limited
32
Define Common Law
Body of law developed by custom or judicial decision sin US courts
33
Define Statutory law
Body of that develops from legislatures enacting new statutes Local ordinances
34
Define Federal law
Apply to all states whereas state statutes only apply within the state's borders
35
Define Uniform law
National Conference of Commissioners on Uniform State Laws draft model laws for the states to adopt
36
Define Uniform Partnership Act
Adopted by all states except one and is a model to use whenever two or more individuals wish to establish a partnership
37
**Define General Partnership
Governed by common law and statutory law Voluntary agreement between an "aggregate of people: Formed by a lawyer NO LEGAL STANDING
38
Define Agency
Relationship between two parties in which one party (agent) agrees to represent or act for the other party (principal)
39
Define Partnership via the UPA
An association of two or more persons to carry on as co-owner's of a business for profit Partner cannot become a partner without being invited
40
Define Aggregate Theory
Property and other assets held by individuals | Lawsuits brought against partners NOT business
41
Define Entity Theory
Business name can enter into agreements | Assets owned by the business- not affected if a partner leaves
42
Will Smith and Jack Jones are general partners (50% share each) in Ajax Pharmacy that exists in Corsicana, Texas. Texas is an entity state. If Will and Jack want to expand the business and take a loan, can the loan be in the name of the business?
YES
43
If Will and Jack do not want to follow the UPA, can they create their own agreement and what is it called?
Yes; Articles of Partnership
44
Define Articles of Partnership and where is it submitted
Written up by a lawyer and filed with the county clerk's office Clearly state how profits and losses would be divided, general responsibilities of the partners, amount to be "drawn" by each partner from personal expenses, limits on each partner to bind the others to an obligation of the business
45
In Texas, each partner is required to do what?
Make some material contribution to purchase his or her interest in the partnership, not limited to the type of property (cash, real estate) that can be limited
46
How can a partnership dissolve?
Death, bankruptcy or the inability of a partner to fulfill the stated obligations of the contract unless the partnership aggreement makes specific contigency provisions
47
Advantages of partnership
Larger potential pool of capital and specialization | Partners contorl their own business activities
48
Disadvantages of partnerships
``` Unlimited liability (personal property) Agency (one poor partner can do a lot of damage) ```
49
Define Hybrid Forms of Partnerships
Limited Liability Partnerships
50
Who typically uses LLP?
Attorney's/physicians/accountants OR by family business
51
What do you have to do to get an LLP legit?
File a form with the secretary of state and the business name must include the initials "LLP" File an annual report with the SofS to retain the LLP
52
Define LLP
Allows professionals to avoid the personal liability for the malpractice of other professional partners Each partner is liable for his on wrongful acts BUT if there is a supervising partner for that individual they are liable too
53
Define FLLP
Family LLP Agriculture where the business partners are primarily of the same family Provides exemption from real estate transfer taxes when partnerships real estate is transferred among partners
54
Define LP
Limited Partnership Oldest One general partner + one limited partner General partner: management responsibility and assumes all debts Limited partner: contributes case or property,
55
How do you make an LP?
File with the SofS and must include "LP" in name
56
Define LLLP
Limited Liability Limited Partnership | Limit all partner liability to the amount of their investments in the business
57
Define Corporation
Association of 2 or 3 + individuals CHARTERED under the laws of the state to conduct business as an entity, separate from its "owner"
58
Define Chartered
It is the Articles of Incorporation and is a document htat must be filed with the SofS
59
Okay so we are chartered, now what?
They must elect a Board of Directors and adopt bylaws to govern how the organization will be run.
60
What does the Board do?
Appoint officers to carry out the wishes and direction of the Board and manage the day-to-day activities of the business
61
So what about the people who OWN the business?
They are shareholders not Board members
62
Business corporations are divided into what?
C and S
63
All C corporations must include?
The term Corporation, Incorporated, Company or Inc in their name
64
Advantages of a C Corporation
The duration of a corporation is perpetual unless otherwise stated Death of a shareholder/Board member/officer does not affect its existence Officers and shareholders are protected from personal liability
65
Disadvantages of C Corporation
Double taxation
66
Define Double taxation
Corporation will be taxed at high corporate rate for earnings and then individual shareholders are taxed as ordinary income from earnings on stock
67
Define S Corporation
Subchapter S Passes profits and losses through to its owners similarly to a partnership No more than 100 shareholders + limitations on who Avoids double taxation
68
Define LLC
Limited Liabilities Companies | Tax treatment of a partnership with limited liability advantages of a corporation
69
LLC is not a partnership nor a corporation? What makes it different?
NO shares, it has interest certificates No shareholders, it has members Has an operating agreement Member's liability is limited to their investment
70
Advantage of LLC
Profits are passed through the members and do not reside with the company
71
Disadvantages of LLC
``` Limited lifespan (30 years) Member death/withdraw, LLC may dissolve unless there are buy-out provisions in the articles Cannot not freely transfer interest --> hard to increase capital ```
72
Bob Smith is the president of Bob Smith Pharmacy, Inc. and it is listed at the county court house as a C corporation with Nancy Smith as Secretary. 100% of the shares are owned by Bob and Nancy. If Bob should suddenly die, does the business still exist by law?
Yes
73
Define Merchandising Firm
Purchase products at a cost and re-sell to achieve a profit | Must consider cost of purchase + cost of inventory available for re-sale (Cost of Sale)
74
Define Service Firm
Pharmacists provides "services" rather than a commodity | Administrative/operating expenses need to be allocated if "service role" is done in the pharmacy
75
Sole Proprietorship Book/Taxes
Income statment information moved to Schedule C or personal 1040 income tax form Owner cannot hire himself so no owner salary Withdrawal account for money taken from business for personal expenses
76
Partnership Books/Taxes
Each partner has a withdrawal account Income statement infor will be transferred to each partner's personal 1040 Schedule C of Form 1065 Capital investments should match % ownership
77
Corporation Books/Taxes
Owner will be a salaried employee Corporation is responsible for its own taxes, profits and losses Capital infusion increases equity
78
Will Smith and Jack Jones are general partners (50% share each) in Ajax Pharmacy that exists in Corsicana, Texas. Texas is an entity state. For 2013, the business generated $300,000 of net profit (profit after all expenses). Will's share of the profit that he reports on his personal income tax (Form 1040) is __________?
$150,000
79
Define Accounting
Service activity which functions to provide quantitative info about business activities in the form of accounting statements - Useful in business decisions
80
Define Chart of Accounts
"Blueprint" | List of all accounts to be used by the business sub-divided by section
81
Define Journal
Book of original entry and it contains initial recording of transactions
82
Define General Ledger
Basic structure of the accounting system | Separate pages to capture the transactions for each account
83
Define Calendar year
If the accounting period is 12 consecutive months starting with January
84
Define fiscal year
If the accounting period is 12 consecutive months starting in any month other than January and does not start and end in the same year
85
Who uses fiscal years?
Corporation and partnerships
86
Define balance sheet
Primary financial statement showing the financial position for a business
87
**********ASSETS =
Liabilities + Owner's Equity
88
Define Double entry accounting
When posting transactions to the journal, we use double entry accounting which means that we will have equal debit and credit dollars for every transaction
89
Define assets
Economic resources owned by the business and are expressed as either current or non-current assets
90
Define Current Assets
Assets that will be sold, consumed or converted to cash within on operating cycle of the business
91
Current assets include:
``` Cash and cash equivalents Accounts receivable Inventory (merchandise/supplies) Short-term investment Prepaid expenses ```
92
Define Accounts Receivable
Amounts owed to the pharmacy by its customers
93
Define Merchandise Inventory
Consists of goods that the pharmacy has purchased for resale
94
Define Supplies inventory
Consists of goods that were purchased to be used in the business
95
Define prepaid expenses
Payment is made for a good or service in an accounting period prior to the one during which the good or service is actually used
96
Define Non-current assets
Assets that are not sold, consumer or converted to cash within the normal operating cycle of the business or one year Purchases for use in the business
97
Examples of Non-current assets
``` Land Buildings Fixture Cars Computers ```
98
Define Liabilites
Amounts owed to persons or business other than the owners
99
Define Current Liabilities
Debts that will come during the current operating cycle of the business - i.e.: accounts payable, credits, accrued expenses, tax liability, long-term debt
100
Define Non-current Liabilites
Debts that come after the current operating cycle of the business - i.e.: car loans payable over five years, property mortgages
101
Define Owner's Equity
Claims against the business by the owners | Increases through earnings (result of profitable operation)
102
ID the section of the balance sheet where you would find the following: - Accounts Receivable: - Accounts Payable: - Prepaid expenses:
Current assets Current liability Current assets
103
Net Income =
Revenues (sales) - Expenses Revenue increases owner's equity Expenses reduce owner's equity
104
Define COGS
Cost of Good Sold Reflective of purchases in the accounting period and beginning and ending inventories Periodic system

Finance Exam 1 (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions