Chapter 1

Question 1

What is Bookkeeping?

Answer 1

It is the process of recording and classifying transactions.

Question 2

What is Accounting?

Answer 2

It is the system of summarizing, interprettnig, and communicating financial data.

Question 3

What is Budgeting?

Answer 3

It is the process of planning for the coordination of resources and expenditures.

Question 4

What does a budget reflect?

Answer 4

It reflects the priorities of the business and the resources needed to accomplish them.

Question 5

What is the goal of the property or facility manager during the holding period of the property?

Answer 5

It is to enhance the value of the property, thus providing a profit potential upon final sale.

Question 6

How do the property and facility managers use periodic financial reports?

Answer 6

To plan facilities budgets and make business decisions to best enhance the needs of the building occupants, market forces, and the objective of enhancing value.

Question 7

What is the goal of the accountant during the holding period of the property?

Answer 7

To deliver accurate, meaningful and timely financial reports to teh decision makers managing the property.

Question 8

What are transactions?

Answer 8

They are financial events that are recognozed within a financial statement or report.

Question 9

Define Revenue Cycle.

Answer 9

The functions required to exchange products or services with customers for cash.

Question 10

Define Expenditure Cycle.

Answer 10

Those functions that require property, goods, services, and labor; pay for them; and classify, summarize, and report what is acquired and what is paid for.

Question 11

What is an Account?

Answer 11

An individual records of information and transactions related to each asset or liability and to each aspect of owners equity.

Question 12

What is a Chart of Accounts?

Answer 12

A detailed listing of the accounts to which income and expenses are assigned.

Question 13

What is Asset?

Answer 13

Anything of value that is owned.

Question 14

What is a Liability?

Answer 14

A debt that is owed.

Question 15

What is Owner’s Equity

Answer 15

The owner’s share or contributions either as an initial investment or as subsequent cash infusions.

Question 16

What is the Basic Accounting Equation?

Answer 16

Assets=Liabilities + Owner’s Equity

Question 17

What is a Balance Sheet?

Answer 17

It is a statement of the financial position of a business entity at a particular point in time, reflecting the accounting.

Question 18

What is true for both sides of the accounting equation?

Answer 18

Both sides of the accounting equation are always equal.

Question 19

What are the three sets of books that companies typically keep?

Answer 19

General Journal-all transactions recorded in chronological order.
Cash Journal-list all expenditures and receipts for each business day and the resulting effect on the bank balance.
General Ledger-a collective record of all the active accounts of the entire business in numerical order.

Question 20

What are the major financial transactions that must be monitored during property management?

Answer 20

Tenant Collections
Vendor Payments
Monthly Operating Results

Question 21

What are three basic external reports

Answer 21

Income Statement
Balance Sheet
Statement of Cash Flows

Question 22

Define Accrual Basis Accounting.

Answer 22

It is a system that adjusts cash activity for current period activity that did not occur in cash for both revenue and expenditures. (Income and Expenses are recorded when due and not when received or paid)

Question 23

What is the cash method?

Answer 23

It is the accounting method in which income and expenses are recorded only when received or paid out.

Question 24

Define Income Statement.

Answer 24

It is a statement prepared on an annual basis reporting net income or net loss from revenues earned and expenses incrued.

Question 25

What are Accounts Receivable?

Answer 25

It is monies earned, but not yet received, which are recorded as assets on the balance sheet

Question 26

What are Accounts Payable?

Answer 26

It is debts owed to other businesses which are recorded as liabilities on the balance sheet.

Question 27

What is a Cash Flow Statement

Answer 27

It is a report that describes the changes in cash from one period to the next.

Question 28

What are Accounting (Internal) Controls?

Answer 28

Efforts made to safeguard assets, ensure accurate and reliable accounting data, promote efficiency,and adhere to prescribed management policies.

Question 29

What are Cash Controls?

Answer 29

They are procedures to ensure that cash is properly handled and to combat human error.

Question 30

How do building owners control costs?

Answer 30

By tracking the efforts of building manages and by ensuring internal control procedures to be adequae to ensure that the actual spending process proceeds within parameters as esatblished by the budgeting process.

Question 31

What is a Management Agreement?

Answer 31

It is a document that outlines the scope of the work required to manage the property, the compensation, and the reporting requirements.

Question 32

What is the basic accounting equation?

Answer 32

Assets=Liabilities+Owner's Equity

Question 33

Fill in the blanks: To make an accounting entry that increases the value of an asset you will _______ that asset account; to make an entry that decreases the value of an asset, you will _________that asset account.

Answer 33

Debit, credit

Question 34

List the three common financial statements used for external reporting.

Answer 34

The income statement, balance sheet, and cash flow statement.

Question 35

How do owner's control costs?

Answer 35

Byassisting in budget preparations, tracking monthly budget variances, and establishing internal controls for purchases.

Question 36

List several advantages of using purchase orders.

Answer 36

Purchase orders allow purchases to be tracked in chronological order, limit access, centralize purchasing, consolidate orders and discounts, recorda accumulation of inventory, validate accounts, and provide safeguards against unauthorized use of company funds.

Question 37

What should be included in a tenant file?

Answer 37

A copy of the lease, lease summary, lease amendments and escalation clauses, correspondence, rent rolls, rent roll change instructions, floor plans and alterations, informantion about keys and locks, billings, and financial reports

Question 38

What information should be included in a delinquency report?

Answer 38

Scheduled amount of money due and unpaid, length of time amount is past due, actions taken to collect, status of eviction proceedings.

Question 39

The process of plannig for the coordination of resources and expenditures is known as: a) accounting b) reporting c) budgeting d) bookkeeping

Answer 39

c) Budgeting

Question 40

The primary goal of property management is to: a) deliver timely and accurate financial reports b) enhance the value of the property being managed c) reduce costs d) keep the tenants satisfied

Answer 40

b) Enhance the value of the property being managed

Question 41

Recognizing revenue during the period it is earned and not necessarily recieved and recognizing expenses when the obligation to pay is incurred and not necessarily when they are actually paid, is called the: a) accrual method b) cash method c) hybrid mehod d) balancing method

Answer 41

a) accrual method

Question 42

Owners are involved in cost control via all of the following means except: a) setting internal reporting procedures b) tracking monthly budhet variances c) limiting spending authority in the management agreement d) monitoring budget preparations

Answer 42

a) setting internal reporting procedures

Question 43

What is the owner's equity portion of the balance sheet for a building purchased for $300,000 with a loan of $225,000? a) $525,000 b) $300,000 c) $225,000 d) $75,000

Answer 43

d) $75,000