Budgeting and Accounting Concepts Flashcards
1
Q
Which of the following financial transactions are categorized as part of the expenditure cycle for a commercial office building?
A
Staff receives invoices for window washing, the elevator technician receives a check for last weeks service, and the property manager signs for janitorial services.
2
Q
The fundamental accounting equation states that assets = liabilities + owner’s equity.
A
True
3
Q
When receiving a rent check from a tenant, reflect the increase in the rent income account by recording a ________ for the amount paid.
A
Debit
4
Q
For the balance sheet to show a balance between accounts, liabilities must be equal to assets plus owners equity.
A
False
5
Q
Because the property manager uses ______ basis accounting, the books will reflect expense incurred for vendor services even if the payments have not yet been made.
A
Accrual
6
Q
Shows revenues earned and expenses incurred in earning those revenues, resulting in net income or net loss for the period.
A
Income statement
7
Q
Reflects the balances of each asset, liability, and owners equity account at a particular point in time.
A
Balance sheet
8
Q
Describes the changes in cash from one period to the next.
A
Cash flow statement
9
Q
“Your main function for the next few months will be to record and classify transactions. You will be performing the process of _______.”
A
Bookkeeping
10
Q
“To the degree you are able to assume the role of accountant, you’ll engage in many more functions. You will not be responsible for ______ financial data.”
A
Memorizing
11
Q
If you perform an accounting functions, you will ______ financial data.
A
Interpret
12
Q
When we create our budget, we make a plan for financing expenditures in the _______.
A
Next year
13
Q
Your job functions will include acquiring property, paying for it, and reporting on what is acquired and what is paid for. You’ll be involved in ___________.
A
The expenditure cycle of accounting
14
Q
When you balance the books, you will basically be dealing with:
A
Assets, liabilities, and owner’s equity.
15
Q
“If the company takes out a loan to make capital purchases, how would you record this?” To be correct, you should record the money received as a ________ in Assets and as a ________ in Liabilities.
A
Debit; Credit
16
Q
Day after day, you record debits and credits for each entry to the balance sheet. This process is referred to as ________ accounting.
A
Double-Entry
17
Q
The common set of accounting principles, standards, and procedures that Janet uses to record accounting data and compile the company’s financial statements is known as:
A
GAAP
18
Q
“If we grow to the point where we become a large multinational company doing business in many countries, what set of accounting principles, standards, and procedures will we use?” You ask. “We’ll have to use the ________.”
A
IFRS
19
Q
A ______ building-by-building comparison of actual operating income and expenses against the budget is used to determine the success of the property manager in meeting operating plans.
A
Monthly
20
Q
If I want to know what monies have been earned, but not yet received, by the company, what standard financial statement would I consult?” “You would want to examine the ________ statement.
A
Accounts receivable
21
Q
Prepare financial reports on a(n) ________ basis, as it is the most basic method.
A
Cash
22
Q
You will soon be introduced to accounting, or internal, controls that maximize cash income and minimize cash outflows. In particular, you will have to learn how to help the company avoid the most common error in properly administering tenant leases, which is:
A
Overlooking charges that are properly billable to the tenant.
23
Q
The owners of the building you manage are committed to ensuring that company funds spent on building supplies and services are highly regulated. They require that ______ orders are submitted for approval before any actual major purchases are made.
A
Purchase
24
Q
If you want to show the owner of the building the details regarding tenants who are late on their rent payments, you will reference ______.
A
The delinquency report
25
The information on the rent roll stays the same from year to year.
False
26
You need to tell the leasing team how many suites are vacant in the building. You will reference the _______.
Vacancy report.
27
If you use the BOMA Chart of Accounts, she should understand that the level that reflects the functional categories of building operations is the ________ level.
First
28
The controls that you implement for the administration of accounts payable and receivable are both necessary and proper. You know that the individuals who authorize payments ________ be the same people who issue the checks.
Should not
29
The report that contains the listing of all current tenants in the building along with both financial and physical information. This type of report is the:
Rent roll
30
________ is what creates the foundation for sound decision making based on information, proper year-end reconciliations, and for compliance with tax and legal requirements.
Accurate record keeping
31
Given the past disarray of your properties records, you are are doing your best to prepare for an audit. The audit trail that you are attempting to construct leaves a record that ________ can verify.
Auditors
32
The advantages of using purchase orders include clearly outlining the goods being provided, outlining the general terms and conditions of the purchase, and:
consolidating orders and discounts.
33
A tickler system helps ensure that record-keeping responsibilities are met. This system typically monitors the due dates for all of the following
Lighting bills,
34
Killian Consultants just signed a ________ lease at Marvel Tower, an office building downtown. This lease should result in fewer questions when it comes time to pay rent, as the base rent covers all charges owed and there are no additional payments required from the tenant.
Gross
35
Peak Properties is aiming to obtain new retail tenants in a strip mall. They will sign a ______ lease, in which the tenant is responsible for paying base rent, but is also charged separately for property operating expenses, property taxes, insurance, repairs, site maintenance, building upgrades, and routine maintenance.
Triple-Net
36
The tenant named in a lease is always the individual or entity that pays the rent.
False
37
Specifies fees charges to tenant in the tenant stays in the leased space after the lease has expired but does not renew the lease.
Holdover
38
Common in retail leases; it specifies the hours in which the tenant is expected to operate a business.
Continuous operation
39
Indicates what will happen if through the fault of the landlord the tenant is delayed in moving into the leased space.
Delay of possession
40
These items are likely to be listed as billable items in a customary and additional service lease clause.
Overtime HVAC, electrical outlet repairs, WiFi
41
Which report should you use if you want a visual interpretation of the size and position of each leasable space in a building, to include both those spaces that are vacant and those occupied by tenants?
Stacking plan.
42
Regardless of the amount of experience Miguel might have, the law assumes that as a property manager, he is a ________ and is therefore held to a ________ standard than the building’s tenants.
knowledgeable party; higher
43
A prospective tenant for the vacant third floor office space in Miguel’s building is a branch location of a national chain of insurance agencies. Since Miguel is unclear if the corporate office for the chain will pay rent or the branch leadership, it will be necessary to ________ the name of the lessee if the prospective tenant elects to rent in the building.
document
44
Miguel wants to know how space is allocated among tenants in each floor of his multistory, multi-tenant building. Also, he wants a visual representation of which suites are vacant and the expiration dates of the tenant leases. He should request the:
stacking plan.
45
As he has worked with tenants (both current and prospective) over the years, Miguel continually reminds them of the main function of a lease. The lease’s main function is to protect the interests of the:
landlord and the tenant.
46
Miguel is changing the way the lease abstracts will be written so that they follow proper and common practice. In its simplest form, a lease abstract is an overview of the most frequently ________ items in a lease
referenced
47
Miguel has a tenant who paid rent three days after the due date. To determine whether or not additional charges should be assessed against this tenant because of his tardiness, which of the following common significant lease clauses should Miguel consult?
late charges
48
Miguel reviews the proposed lease of another prospective tenant who will pay base rent to the landlord, as well as property operating expenses incurred by the landlord. However, the tenant will pay separately for property taxes. This best describes a(n) ________ lease.
single-net
49
One prospective tenant is starting a new business and does not anticipate much cash flow in the first few years. As a result, the tenant requests the type of lease that ensures the landlord pays for all expenses of property operations. This tenant wants a ________ lease.
gross
50
A new tenant to the building Miguel manages decided to install new carpeting in the suite it will soon occupy. The tenant is responsible for overseeing and financing the carpet installation, which has fallen behind schedule and delayed the date when the tenant planned to move into the suite. Which lease clause should Miguel consult to confirm whether or not he should hold off on assessing rent charges for the tenant until the carpet installation is complete?
delay of possession
51
As a property manager, you communicate a scheduled increase in monthly rent to one of the tenants. This increase raises the tenants base rent.
True
52
These expenses are examples of charges that can be categorized to CAM.
Lighting, signage, landscaping, utilities.
53
What is the portion of rent charges that is charged in addition to base rent that is determined through the use of a percentage or calculation called?
Pro rata share
54
_____ basis accounting requires that income and expenses are reported related to the period for which they are applicable, whether or not cash has been transferred.
Accrual
55
The landlord spends a portion of the budget each year on advertising. The costs are recovered by charging _____ to the tenants.
Percentage rent
56
Examples of non recoverable costs:
Owner travel expenses, utilities for vacant suites, tax return prep fees, cap ex projects.
57
In order to calculate each tenant’s share of the property cost increases, Natalie would ________ by the tenant’s pro rata share.
multiply the net cost increase
58
Natalie insists on adherence to best practice in communicating changes in monthly estimates for the expense portions of leases. The best practice is to calculate and communicate such changes to tenants by ________ to become effective with the monthly rent for January.
early December
59
The first thing Natalie does is to examine the two main categories of rent for Carmichael’s properties. The two categories are base rent and ________ rent.
additional rent
60
Although it has not proven to be a problem, Natalie reminds her colleagues that, from a legal perspective, ________ income received by the owner of a property is considered to be rent.
all
61
Among the ________ expenses that Natalie can look to for recapturing purposes are real property and operating expenses, common area maintenance charges, and electricity.
common billable
62
Instead of using the operating costs from a base year of operation to assess modified gross lease rent increases, Carmichael Properties uses the expense stop method. This is a somewhat confusing method, and Carmichael and its tenants experience this confusion. However, in spite of what people may believe, the rule is that when the expense stop is reached, the owner ________ paying and the tenant ________ paying.
stops; begins
63
Natalie is dissatisfied with the kind of lease Carmichael Properties employs with the tenants of the retail mall it owns. Since Carmichael incurs the costs of advertising and special promotions to make the mall attractive to consumers, Natalie wants Carmichael to take advantage of ________ clauses, which will allow Carmichael to recover these expenses and risks by participating in the success of the retail tenants.
percentage rent
64
Natalie is concerned by how the various expenses have been categorized in Carmichael’s books. Those expenses that are unrelated to the management, maintenance, and repair of the building should be classified as ________ expenses.
nonrecoverable
65
Natalie is also concerned that the members of her department do not seem to understand that cash basis income statements do not conform to GAAP requirements. However, even if the department opts to use cash basis—as opposed to accrual basis—for its income statements, the key is to review the expense accounts to ensure that each category contains a full ________ of activity.
12 months
66
To ensure that Carmichael Properties receives the value of a dollar of rent adjusted for inflation, base rent is increased annually based on increases in the CPI. Increases are determined by comparing the ________ CPI to the base CPI.
anniversary
67
The tenant takes occupancy of the space on March 21, the tenant will only be charged for 10 days of rent in the Month of March.
Prorated
68
One method to attract new tenants is to offer ______ rent, which allows tenants to pay a lower rent at the beginning of their tenancy with the understanding that it will increase with time.
Stepped
69
What's a possible explanation for why a tenant will need to pay rent during an abatement period?
"While your lease guarentees free base rent for three months, you still owe additional rent for direct charges, such as after-hours hvac service.
70
Which tenant will likely need to apply the holdover rent clause in their lease?
A business in the slow process of finding an alternative place of operation.
71
What is helpful when dealing with delinquent tenants?
Aged accounts receivable reports, knowledge of tenant payment history and habits.
72
What is the order to classify income?
Cash received or amounts charged are recorded as income, income is classified into accounts, amounts and codes are transferred to general ledger, monthly financial statement is created
73
The landlords at Ideal Towers sometimes have to charge holdover rent. For such a tenant, whose base rent is $25,000 per month, the landlords apply a holdover rate of 1.25. This means that the holdover tenant should pay ________ per month.
$31,250
74
The finance office personnel were confused about the nature and obligations of lease reminder notices. Elvin informs them that a lease ________ a legally binding contract that ________ obligate the landlord to provide the tenant such notice.
is; does not
75
Ideal Towers has had its share of delinquent tenants. Elvin takes steps to ensure that his office will follow generally accepted practice regarding tenant receivables. This means that monthly reminders will be delivered to tenants on or before the ________ of the month preceding the due date.
25th
76
Unfortunately, the owners of Ideal Towers have not been charging all the rent that they are entitled to charge. For example, they could pass on the costs associated with operating expenses, real estate taxes, and common area maintenance. These charges would be considered ________ rent.
Additional
77
Elvin explains to his colleagues that with rent abatements, the rent periods are often ________ the terms of the lease. Also, the rents may apply to ________ only.
added to; base rent
78
While recurring monthly charges are copied from the tenant database to the cash receipts journal, _______________ are entered directly into the cash receipts journal in the month they occur.
one-time tenant charges
79
In discussions with his office’s personnel, Elvin discovers that they have never used ________ rent to their advantage. This type of rent typically offers rents that are below-market, but rise over the life of the lease.
stepped.
80
Since tenants move into their spaces at different times during a particular month, the first month’s rent is often prorated. Unfortunately, Elvin learns, the leases signed by both tenants and the landlord do not contain a(n) _______ letter, which specifies the exact date of the lease commencement and expiration.
commencement
81
Elvin discovers that the finance department does not pay heed to the three functions of the revenue cycle. For instance, no one in the department understands that the final step in the revenue cycle is:
reporting of billings and collections.
82
Elvin ensures that the collections and charges they receive are properly classified. This means that he, as property manager, and the accounting staff should assign a ________ to each category of income they collect or charge.
chart of account codes
83
What is it called when you assigned individuals to work on different sections of the budget.
Responsibility budgeting
84
Which documents should be considered when updating the rent roll?
Commencement letter, new leases not yet abstracted
85
List two reasons why base rent could change from year to year
tenants might be scheduled for rent increases, some leases may expire
86
_____ occurs when there is a difference between recoverable operating expenses and the actual operating expenses.
Slippage
87
The common practice for variance reporting is when the percentage is greater than ______
5 percent
88
What is the stages of budgeting base rent?
Schedule base rent monthly for each existing tenant, increase base rents for future stepped rent increases, identify a success ratio in obtaining renewals for leases expiring during the year, quantify leasing efforts need to market vacant space
89
In budgeting base rent, Sheila would like to use the most reliable information. Of the four stages in budgeting base rent, the stage involving the most reliable information would be:
scheduling base rent monthly for each existing tenant.
90
In scheduling tenant base rent, Sheila is best advised to use a base rent worksheet with a complete listing of the tenants and:
the suite numbers and square footage.
91
Sheila has the leasing team develop the leasing budget for the downtown office property. Likewise, she has the operations manager develop the building operating budget for the same property. This practice represents ________ budgeting.
responsibility
92
According to generally accepted procedure, Sheila should communicate budget variances on a(n) ________ basis in the variance analysis.
Monthly
93
Sheila works hard to ensure that spaces are vacant for as little time as possible. She also makes sure that the expense caps written into the leases are generally higher than what the tenants may prefer. Both of these efforts help to lessen the difference between recoverable operating expenses and actual operating expenses. This difference is known as:
Slippage
94
In her budget projections, Sheila typically enjoys high success ratio in the range of 90 to 95 percent. This is because she combines market conditions with:
owner objectives and an assessment of past performance.
95
Before Sheila begins budgeting income, she first must update the rent roll. A variety of influences affect the status of the rent roll. However, in terms of updating the rent roll, she need not concern herself with:
results of tenant satisfaction surveys.
96
Other sources of income do not escape Sheila’s notice. These other sources, such as parking, storage, and rooftop solar panels, require a(n) ________ schedule to show additional rent charges.
monthly tenant-by-tenant
97
The RFP should do all of the following: outline requirements of the contract, establish a base line to enable objective vendor proposal comparisons, include an appropriate deadline, but is should not include:
the payment the vendors will receive.
98
These items are most important to consider when comparing vendors:
Reasonability and achievability of each vendors bid, each vendors experience and reputation, each vendors hourly or productivity rates.
99
Should minority status be included in the vendor database?
Yes
100
What is the correct order of events in order to pay an invoice:
receive invoice, date stamp and match invoice with appropriate purchase order, contact vendor if there is a discrepancy, make payment to the vendor
101
What to do if an invoice is received that was not budgeted?
Code the expense to the general account.
102
What should be included on the payroll register?
Hours worked, workers compensation and health insurance, gross wages, federal and state withholdings.
103
While Kevin is satisfied with the quality of the service provided by the cleaning vendors, he is concerned about the cost. He therefore is going to submit RFPs to various cleaning vendors. It is generally recommended that RFPs be delivered to no more than ________ vendors to ensure proper consideration.
3 to 5
104
There are a variety of criteria Kevin should use when evaluating and comparing vendor RFPs. However, he need not concern himself with the vendor’s:
corporate headquarters.
105
Having decided on Heavenly Cleaners, Kevin has one of his office staff enter the vendor’s information into the vendor database. Which of the following is an example of the kind of information that should be entered into the database?
federal tax I.D. number
106
Kevin and a representative from Heavenly Cleaners agree on a price for the services to be provided. Thereafter, a purchase order is drawn up. A purchase order:
is forwarded to the vendor from the purchaser.
107
Heavenly Cleaners has been performing its duties satisfactorily for a few months. Upon receipt of their invoice, Kevin should first have the invoice:
date stamped and matched with the appropriate PO.
108
Kevin reviews the coding of invoices. The first step in this process is to:
review the budget to determine if the expense item was anticipated.
109
If the unpaid invoice report is properly structured and written, Kevin can use it to track invoices that ________ been coded and ________ been paid.
have; have not
110
If Kevin were to examine his organization’s payroll register, which of the following elements could he expect to find on it?
gross wages
111
Higher _______ means increased rent, but also increased CAM
occupancy
112
A projection used to estimate the expenses of the property over the anticipated holding period.
Pro Forma
113
Which strategies should be used when preparing to present the revised budget to the owner?
remember that the building owner will have the final say, explain the impact budget revisions will have, and emphasize the budget items that are critical to the effective functioning of the building.
114
What is the copy of the PO that goes into the building called?
Receiving copy.
115
Segregating costs into logically similar groups makes it easier to localize cost excesses. This process is called:
Cost accounting.
116
Property insurance is a
fixed cost
117
Electricity is a
variable cost
118
grounds maintenance is a
semi-variable cost
119
Rudy meets with the finance office staff to learn the various costs of operating the mall. He categorizes all the costs into their appropriate categories. Costs such as grounds maintenance are properly categorized as ________ costs.
semi-variable
120
As Rudy meets with the mall staff, he hears many opinions about the “real” reason building costs vary. Of course, he already knows that the most typical factor affecting variation in building costs is:
occupancy.
121
The owners of Best Properties have to revise the operating budget of the mall; that is, they are considering cuts that will enhance the financial performance of the mall. Cutting only proposed capital expenditures that are not immediately needed for effective operation, safety, and the value of the property is generally considered to be:
ideal.
122
The mall owners and Rudy have come to an agreement about the expense budget for the coming year. Should Rudy see a material variance from the budget, he will inform the owners early so that they may:
review the variance with Rudy to put alternative strategies in place.
123
As property manager, Rudy approves invoices for payment, but he knows that some invoices, such as an invoice for ________, will require approval from the owners.
new carpeting for a 20,000-square-foot unit
124
Best Properties would have used a ________ as a projection of the expenses of the property over time, and it would continue to monitor the operation of the property to ensure that the projections made during investment analysis are met or exceeded.
pro forma
125
Rudy’s review of the mall’s books from the past few years reveals separate portions of the budget and income statement for administrative cost, cleaning cost, real estate taxes, and building insurance, as well as a number of other logical categories. Rudy is pleased to see that the office finance staff is using a process called:
cost accounting.
126
Noreen, a member of the finance office staff, brings Rudy the PO log. This log is a numerical listing of all purchase orders:
Issued
127
What are you likely to find in the building operating history?
areas of recurring costs, services provided by monthly contracts, recent major repairs, rehabilitations, and trends
128
What would be lease likely to be useful in marking projections for the upcoming year?
A vendor satisfaction rating
129
Mill rate ________ be assessed for retail center parking lot maintenance
May not
130
Appealing a property tax assessment is usually used to try and lower the property taxes owed by the building but it may lead to
a tax increase
131
Zero based budgeting can help to carefully assess:
whether or not a service contract is actually needed for the building.
132
When you are in a _______ market, you will need to dedicate part of the buildings budget to fixing up the vacant spaces.
soft
133
If Lakeview Office Park experiences severe changes in occupancy, which expenses could Phil expect to be affected?
waste removal
134
If Phil is to estimate utility costs for the upcoming year properly, which of the following could he reasonably use?
projected occupancy changes
135
Jennifer is a typical owner in terms of her requirements for budget reporting frequency. This means that she would expect the budget to reflect all expenses on a _______ basis:
monthly
136
Data are being collected for Phil’s review of service contract expenses. He knows that Jennifer will require an explanation concerning why each of these contracted services is needed, but he will have an answer because he practices:
zero base budgeting.
137
Because it is a soft rental market, Jennifer and Phil acknowledge that payment for requested tenant alterations and tenant improvements fall to the:
landlord.
138
Phil budgets effectively because he begins with the operating history of the property. Part of the operating history is past budgets. How many years back should he go when reviewing past budgets?
two or three years
139
If Phil prepares the expense budget properly, how should the line items in the budget be reported?
in sufficient detail to stand on its own without the need for further explanations
140
Phil includes a discussion of property taxes and mill rates in his budget report. The monies paid to public agencies and municipalities from these taxes can include all of the following uses except:
lobby renovations for Lakeview Office Park.
141
Jennifer will ask Phil about the tax assessment of the property. If she is unsatisfied with the assessment, she may appeal. Phil correctly informs Jennifer that building management is granted one ________ right of appeal.
annual
142
You are drafting a capital improvement plan for his building, which should show the owner that the intended improvements will increase property value by increasing _____ and/or reducing expenses.
Income
143
In addition to earning interest on a principle amount, compounding enables investors to earn interest on:
Interest
144
You can use ______ to find out how much to invest now in order to have a reserve for a capital project in seven years.
Discounting
145
The capitalization rate for an investment may be calculated by dividing net operating income by ______
Value.
146
Subtracting interest from present value yields the net present value of an investment.
False
147
List a few items that could be a capital project:
Boiler replacement, replacement of revolving doors in lobby, installation of LED lighting in the office suites.
148
Cory takes a long-term view when budgeting for larger capital items. The typical five-year capital plan would likely not factor in money for:
biodegradable cleaning products.
149
When setting aside cash reserves for future projects, the ownership of Western Properties can enjoy the benefits of ________, which is the earning of interest not only on principal, but also on the interest accrued.
compounding
150
The senior management of Western Properties reminds Cory to consider the depreciation of the assets to be accrued through the proposed capital projects. If depreciation for an asset acquired through a capital project is not calculated, then ________ taxes must be paid for it.
more
151
Cory meets frequently with the senior management of Western Properties to learn what objectives ownership has with regard to capital improvements. Regardless of the specifics, capital improvement objectives should strive to:
increase income and/or reduce expenses.
152
In calculating the net present value of a capital project, Cory would ________ the present value.
subtract the initial investment from
153
If the proposed window replacement project is approved, Cory can use a sophisticated method of analysis to compare this expenditure to alternatives. All of the proposals are expected to produce benefits for a time period greater than one year. This method, which factors in all current and future financial ramifications of a project, is known as:
life-cycle costing.
154
What value would Cory calculate for a project with a six percent capitalization rate and a net operating income of $150,000?
$2,500,000
155
In discussing possible projects and investment for the capital budget, Cory must engage in the process of discounting; that is, the determination of the ________ value of an investment based on expected future cash flows.
present
156
What are possible causes for discrepancies found in bank records:
the building accounting staff did not record receipt of a late rent payment, but the payment was deposited; the building accounting staff did not account for new service charges from the bank; the bank made an error in recording transactions.
157
The following could be found on an receivable report:
Security deposits, reimbursements, rent payments
158
What document should you reference if you want to see only disbursements made by the building?
Payment register
159
To more easily identify patterns in transaction types, the transactions should be grouped by _________
the chart of accounts
160
When preparing the general ledger for a building, the cash accountant should ensure that cash disbursements are transferred to the expense accounts as debits.
True
161
Favorable weather lessening the severity of implications of a budget variance is an example of a ________ operating variable.
Offsetting
162
If Douglas needs a quick review of the full payment history associated with each distinctive vendor providing services at Bayview Mall, he will have to use the:
expense distribution report.
163
Even if the budget is shown to have been fairly accurate for the year, Douglas still has to explain offsetting operating variables. Examples of typical offsetting operating variables include changes in occupancy and:
weather
164
If the property accounting staff forgot to record any receipts, the bank balance will be ________ than the property’s balance. Likewise, if the staff failed to account for bank service charges, the bank balance will be ________ than the property’s balance.
higher; lower
165
Douglas’ review of the general ledger convinces him that his accounting staff have performed their jobs correctly. Cash receipts are transferred to the income statement as ________, and total receipts are transferred to the cash account as ________.
credits; debits
166
Douglas recognizes the need for precision as he reviews financial reports so that any budget variances he identifies are based on accurate information. In particular, his field review should leave him assured that all ________ are properly classified and reflected in the cash basis income statement.
expenses and income
167
As the most significant source of cash at any commercial building is rent, Douglas must work with the accounting staff to ensure that rent payments received, reimbursements, security deposits, and other collections are reflected in the:
receivable summary report.
168
Douglas is aware that some of the budget variances he shares with senior management will likely impact next year’s budget. He anticipates that the costs associated with the new fire alarm system will likely be ______ in next year’s budget so that tenant pass-through payments are reflected.
reclassified
169
Douglas discovers that contrary to standard practice, the ________, which gives a detailed summary of all cash disbursements, is not organized by check number.
payment register
170
In the process of bank reconciliation, Douglas can fully expect the bank’s property records to contain a record of each cash receipt and ________ of the property during the month.
disbursement
171
A building can keep a reserve for ___________ on the occasion that a tenant has been missing payments.
uncollectible rents
172
What are examples of a prepaid expenses?
Taxes, services and mainteance contracts, insurance
173
Amortization _______ the total cost of a prepaid expense as recorded on a buildings books over the course of time.
spreads out
174
You order cleaning supplies in bulk for the building and the supplies are paid for all at once. The accounting staaff removes the supplies from the cash basis income statement and then records them on the balance sheet as an asset. On the balance sheet, these supplies are known as _______
Inventory.
175
You order cleaning supplies in bulk for the building and the supplies are paid for all at once. The accounting staff removes the supplies from the cash basis income statement and then records them on the balance sheet as an asset. On the balance sheet, these supplies are known as _______
Inventory.
175
You order cleaning supplies in bulk for the building and the supplies are paid for all at once. The accounting staff removes the supplies from the cash basis income statement and then records them on the balance sheet as an asset. On the balance sheet, these supplies are known as _______
Inventory.
176
__________ reflet transfers made between the balance sheet and the cash basis income statement.
Journal entries.
177
If you want analyze changes from one year to the next, it is wise to request the _________ from the accounting staff.
cash flow statements.
178
For all cash transaction transfers, Dan knows that each transfer to and from the balance sheet and the cash basis income statement must have a debit and a credit. These transfers are known as:
journal entries.
179
Gina has Dan work on amortizing the building’s insurance expenses. In order to ensure that these expenses are accurately recorded, Dan should completely remove the insurance premium from the cash flow statement and record it as a(n):
asset on the balance sheet.
180
Operating under the modified accelerated cost recovery system (MACRS) since 1987, the management at Skyward Office Complex can establish the useful life (via depreciation) of its commercial nonresidential real property to ________ years.
39
181
Given the history at Skyward, Gina knows that some receivable amounts will not be collected. If specific amounts cannot be identified, a percentage of the receivable can be set up on the balance sheet as a reserve for uncollectible rents and recorded as a:
bad debt expense.
182
Dan also works on recording supplies. In this case, when supplies are used in the operation of the property, the applicable cost value is transferred from the:
balance sheet to the cash basis income statement.
183
The cleaning contractor delivers his invoice after the end of each month, and payment for the service is made the following month; therefore, the cleaning expense for that month is not properly recorded. Accrual basis accounting maintains that expenses must be:
recorded for the period the services were performed.
184
Gina asks Dan how he would categorize expenses such as taxes, insurance, and contracts for services. He properly responds that these are most often ________ expenses.
prepaid
185
Among the various assets Dan has to properly handle, which is an example of an intangible asset with expenses that are usually amortized?
tenant moving allowances
186
If Dan has to summarize for Gina the changes in cash that have occurred from one year to the next, he should present her with the:
cash flow statement.
187
What is the correct sequence to use to get the most out of the EER
review types of data in each E#ER summary and expense detail line item, compare EER description to similar information in property's chart of accounts, adjust property data to conform to BOMA standard chart of accounts
188
There are merits to using the BOMA EER but be cautious because:
the data supplied is generally six months old and can be outdated.
189
What benchmarks can be used to evaluate the actual financial performance of the building?
Industry comparisons, prior year comparisons, budget comparisons and variances
190
When sometimes viewing the BOMA EER, there are categories that have a fewer number of data contributors. this means the data can be _____ reliable
Less
191
The _______ varied the data supplied by buildings for the EER, the ______ the mid-range spread will be.
More; wider
192
BOMA’s Experience Exchange Report, while very helpful to Nestor, does have its limitations. Data in the report may not help to plan future projects because they are generally ________ months old.
six
193
When referring to BOMA’s Experience Exchange Report, Nestor should expect the true averages contained in the report to measure costs or income per square foot ________ referring to the number or size of buildings contributing data.
without
194
In reviewing data on buildings in BOMA’s Experience Exchange Report, Nestor notices that there is an even number of buildings on the list. The two in the middle have values of $0.84 and $0.96 per square foot. What is the median?
.90
195
As Nestor does not yet use the BOMA Chart of Accounts, he will need to ensure that the ________ line items and the expense detail line items correspond with the information reported for the Glass Spire so that he can compare his data to that shown in BOMA’s Experience Exchange Report.
summary
196
Nestor relies on BOMA’s Experience Exchange Report because it assists him in making comparisons. This report uses the ________ to determine the sample size for each item of comparison.
number of buildings
197
Nestor is evaluating the property’s performance. According to standard practice, he should evaluate performance against the benchmarks of industry comparisons, prior year comparisons, and budget ________.
variances
198
BOMA’s Experience Exchange Report has mid-range figures. The mid-range would show Nestor how the data are distributed within the middle ________ of the data.
50 percent
199
Besides BOMA International and the Institute of Real Estate Management, from which other organization can Nestor obtain reports used for benchmarking performance in the commercial real estate industry?
the National Association of Industrial and Office Properties
200
What ratios can help evaluate the earning power of a prospective tenant?
Common-size comparative statements, earnings per share, earnings per share, return on equity.
201
When reviewing a perspective tenants financial statements, you should always try __________
to compare a company of a similar size
202
When a company has negligible excess of assets over its current liabilities, this inadequate ______ capital means the company will likely struggle to meet its debts.
Working
203
The auditor cannot formulate an opinion because of an exclusion of a material auding step.
review engagement or compiliation
204
The auditor has some reservations about the financial statements
qualified
205
a clean opinion
unqualified
206
If Hilda is to make proper use of earnings per share in her decision making, she must realize that they are commonly compared to companies in ________ industry and to companies within ________ market size.
the same; the same
207
When analyzing tenant balance sheets, Hilda pays close attention to ________. Adequate amounts of this enable companies to carry sufficient inventories, meet current debts, and take advantage of cash discounts.
working capital
208
A common ratio Hilda could use to determine earning power for Peachtree (as a C corporate structure) would be ________ comparative statements.
common-size
209
According to general practice, which individual at Peachtree is responsible for completing a high level, but not a detailed review of tenant financial statements?
the property manager
210
If Hilda reads the “clean” opinion in an audit report, she would be reading a(n) ________ type of audit opinion.
unqualified
211
Using generally accepted practice, Hilda considers a current ratio of ________ to be a good measure of a company’s debt-paying ability, but knows that the nature of the company’s business, among other factors, could affect adjustments to this ratio.
2 to 1
212
Regardless of the particular financial statement Hilda reviews, they should all adhere to GAAP and be based on certain global assumptions. One such assumption, or concept, is ________, which assumes the worth of all a company’s assets is measured by the original cost rather than the present market value.
going concern
213
In determining a company’s debt service ratio, Hilda would first ________ to determine the amount of income available to pay debt service.
add back interest expense to income before taxes
214
Hilda looks particularly carefully at retail and manufacturing companies with high merchandise turnover. High turnover indicates ________ merchandising and requires a ________ investment in inventory.
good; smaller
215
Prospective tenants often have taken out loans or have secured lines of credit; therefore, their creditors want to see these companies succeed (so they can pay back their debts). Creditors like to see a high proportion of owner’s equity because this equity:
acts as a cushion in absorbing losses.
216
Greg informs Delia, who has impressed him with her dedication and strong work ethic, that she will start training on how to perform _______________ accounting. This method records revenues and expenditures related to the period for which they are applicable, whether or not cash has been transferred.
accrual basis
217
As the current leases expire, Greg will seek to include additional rent for such items as landscaping, parking, and exterior lighting. Among common billable expenses, these charges typically fall into the category of:
common area maintenance charges.
218
Before Bachman Corporation purchased the property where Bonnie works, it projected the expenses of the property over their anticipated holding period. This projection is known as a:
pro forma.
219
Of course, Bonnie wants to keep leasing costs down. The fact that this is a soft market means that _______________ advertising will be required. Additionally, there is a large supply of vacant space available in the market similar to Bonnie's property, which means that the advertising effort will most likely be of _______________ duration.
more; longer
220
Before Gayle's hire, Granite Properties had somewhat sloppy procedures for dealing with uncollectible rent recording. Now, however, Gayle ensures adherence with proper procedure. This means that during the income accrual process, the revenue should be recorded, then offset by a(n) _______________ reflecting the amount of income deemed uncollectible.
expense
221
Some prospective tenants are more likely than others to bring in sufficient cash in their business operations. There are a few common ratios Gayle has available to her for determining a company's earning power. Which of the following is not one of them?
price to earnings
222
Gayle knows that expenses that apply to future periods will often be paid in one lump sum. Each of the following is a prepaid expense except for:
employee severance.
223
Bonnie follows standard industry practice when it comes to comparing service vendors. She properly compares _______________ rates while she _______________ an emphasis on the grammar in vendor proposals.
224
Granite Properties uses the services of Nation Bank for the Metro Mall. Nation Bank's records for the Metro Mall property should therefore contain a record of each _______________ for the property during the month.
cash receipt and cash disbursement
225
Given the nature of the strained relations with the tenants at The Diesel Shed, Greg wonders whether the personnel at Enterprising Properties really understands the purpose of a lease, which is to:
protect the interests of both the landlord and tenant.
226
In order to determine the capitalization rate for a proposed project, Gayle should divide the _______________ by the value of the property.
net operating income
227
In reviewing the books and various financial statements, Greg seeks to specify the type of rent that provides a return on invested capital and includes scheduled rent increases. This is _______________ rent.
base
228
In a _______________ market, when rents are _______________ than average, tenants often agree to stepped rent increases throughout their lease term.
soft; lower
229
As she reviews the various costs that she wants to keep under control, Bonnie categorizes mortgage payments and property insurance as _______________ costs.
fixed
230
Greg wants the owners of Enterprising Properties to enjoy the maximum profit possible from The Diesel Shed. One way to make certain that a property owner receives the value of a dollar of rent adjusted for inflation is to ensure leases have a provision to annually increase base rent based on increases in the:
CPI.
231
For budgeting other income amounts (such as rooftop solar panels and storage), Bonnie is best advised to use a(n) _______________ schedule for these additional rent charges.
monthly tenant-by-tenant
232
In reviewing a tenant's financial statements, Gayle has her team add back interest expense to income before taxes to determine the amount of income available to pay debt service. This income is then divided by the debt service amount to determine the number of times debt service can be paid. The number of times debt service can be paid from income is called the:
debt service ratio.
233
Following generally accepted practice, Gayle ensures that the financial statements for the Metro Mall are stated in _______________, the most reasonable form of a stable monetary unit.
dollars
234
Bonnie knows that no charges can be assessed against tenants in spaces that are vacant. Also, some tenants have expense caps written into their leases. These facts help explain _______________, which is the difference between recoverable operating expenses and the actual operating expenses.
slippage
235
What type of invoices should Bonnie expect to find in the organization's computer holding file?
unpaid
236
Greg needs the owners of Enterprising Properties to consider that, when they identify an expenditure as a capital item, the expenditure _______________ be included in the escalatable cost pool. As such, tenants _______________ be charged for the costs incurred through payment for capital items.
cannot; cannot
237
Most tenants at The Diesel Shed have fairly standard leases. There is one tenant, however, whose rental payment is the base rent paid to the landlord, which includes property operating expenses incurred by the landlord. This tenant pays separately for insurance and property taxes. This tenant has a(n) _______________ lease.
double-net
238
From his first day on the job, Greg insists on adherence to _______________, the common set of accounting principles, standards, and procedures that companies use to record accounting data and compile their financial records.
GAAP
239
Bonnie is keenly aware that building management is granted one right to appeal a real estate tax assessment:
per year.
240
One way of making the proposed capital projects more affordable is to take advantage of depreciation. While Canadian depreciation regulations implement the declining balance method, at present, the US is governed by legislation focused on the modified accelerated cost recovery system, which has increased the useful life of commercial, nonresidential, real property to _______________ years.
39
241
As property manager, which type of purchase order copy would be sent to Bonnie once it is approved?
a numerically filed copy
242
As property manager, Bonnie generally delegates the responsibility for preparation of the individual portions of the budget to experts in the field. In other words, she uses _______________ budgeting, wherein different parties take responsibility for different sections of the budget for the property.
responsibility
243
A tenant at The Diesel Shed continues to occupy space even though the lease has expired. Greg agrees to this as it allows for charging holdover rent. If the holdover rent rate is 1.35 times the monthly base rent (of $20,000), the tenant's monthly holdover rent would be:
$27,000.
244
Greg learns that the _______________ accounting cycle, which includes the functions required to lease the office space to tenants for cash, has been poorly administered and recorded.
revenue
245
Bonnie has assigned a new hire to code invoices. The first thing the newly hired employee should do to perform this task is:
review the budget to determine if the expense items were anticipated.
246
In his informal discussions with the office personnel, Greg discovers that they don't fully understand how the summary accounts relate to each other. That is, they don't understand the fundamental accounting equation, which is:
Assets = Liabilities + Owner's Equity.
247
Greg begins his review of each tenant lease to see how they have been structured and written. For each tenant, he first retrieves the lease _______________, which is one of the most frequently retrieved documents in a tenant file because it contains the core information about the lease.
abstract
248
For accounting purposes, costs are segregated. The major reasons for setting up various cost accounts are to establish a basis for pricing and to enable management to _______________ cost excesses.
localize
249
As a general rule, Bonnie should view the purchase orders forwarded to vendors as _______________ requests for goods or services.
formal
250
In keeping with generally accepted practice, and unless otherwise stated, Greg correctly insists that rent and other charges to tenants begin:
upon occupancy by the tenant.
251
Gayle wants the midpoint of a set of data she is analyzing. She therefore wants the:
median
252
The budget Bonnie draws up is typical in that its time frame corresponds with the reporting frequency required by:
the owner.
253
Gayle tasks one of her subordinates with using the EER to compare the actual performance of the mall against similar commercial retail buildings in the selected region. The true average as presented in the report measures the cost or income per square foot of the property by referring _______________ of buildings contributing data.
neither to the number nor size
254
In budgeting the base rent for tenants of her strip mall, Bonnie will have her staff start by:
scheduling base rents monthly for each existing tenant.
255
Greg reminds the office personnel that, according to generally accepted practice, landlords are _______________ tenants with reminder notices for rent payments.
advised to provide
256
The staff handling the financial data could not distinguish between accounting and bookkeeping. Compared with accounting, bookkeeping does not concern itself with _______________ financial data.
interpreting
257
One element of Greg's reorganization concerns rent amounts in the lease documents. According to generally accepted practice, base rent amounts are usually shown as the total term for the entire lease and often also the:
exact amount owed each month and/or year.
258
Gayle spends time reviewing the general ledger. If it's been prepared correctly, she should find cash disbursements transferred to the expense accounts as _______________, with total disbursements transferred to the cash account as _______________.
debits; a credit
259
In the past, the property management personnel relied on verbal agreements with both tenants as well as with suppliers and vendors. Now, however, Greg insists on the use of _______________, as these allow for tighter controls over approvals, tracking purchases in chronological order, and providing safeguards against unauthorized use of company funds.
purchase orders
260
Gayle relies heavily on the EER, but it does have its limitations. For example, data in the EER may be biased toward _______________ properties
older
261
The cash basis income statement and the balance sheet all appear to be complete and accurate upon Gayle's review. This means that transfers between the two statements are recorded as a(n):
debit and a credit.
262
As part of her field review of financial statements for Metro Mall, Gayle makes sure that the income statement shows income and expense activity:
coded to the appropriate account.
263
Greg informs Delia, who has impressed him with her dedication and strong work ethic, that she will start training on how to perform _______________ accounting. This method records revenues and expenditures related to the period for which they are applicable, whether or not cash has been transferred.
accrual basis
264
In determining next year's property taxes, Bonnie multiplies the mill rate by the assessed value of the property. The monies derived from this formulation typically go on to fund such purposes as:
public health and safety.
265
If Greg wanted to learn about the physical property and its space availability, he should first refer to the:
vacancy report.
266
Gayle follows generally accepted practice in considering a current ratio (i.e., the relation of current assets to current liabilities) of 2 to 1 to be a minimally acceptable measure of a company's debt-paying ability. Yet she knows that one factor that might affect adjustments to this ratio is:
the composition of the company's current assets.
