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Flashcards in midterm - chapter 12 Deck (68):
1

covers social security and medicare taxes

FICA

Federal Insurance Contributions Act

2

how often employees are paid

pay period

3

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

accounts receivable record

4

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

ex. short term loans from a bank, accounts payable

current liabilities

5

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

budget

6

What is the purpose of payroll taxes?

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

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

balance sheet

8

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

revenue

9

assets

anything of value that a business OWNS

10

the assets with a lifespan of more than a year

ex. land, buildings, equipment and expensive technology

long term assets

11

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

start up budget

12

liabilities

amounts that a business OWES

13

extra money only available to certain employees

commissions, bonuses, profit sharing

14

what is the accounting equation?

assets = liabilities + owner's equity

or

assets - liabilities = owner's equity

15

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

net loss

16

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

income statement

17

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

direct deposit

18

employees are either paid a salary or an hourly rate

regular earnings

19

How is profit calculated?

What is the basic financial equation?

Revenue - Expenses = Profit or Loss

20

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

financial records

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

21

What are the 4 steps in budgeting process?

  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

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

accounts payable

23

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

current assets

24

expenses that only happen once in awhile

periodic expense

ex. car repairs, Christmas bonus, car registration

25

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

start up budget

26

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

accounts receivable

27

What is the purpose of a balance sheet?

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

28

What are the 3 types of budgets?

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

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

social security tax

30

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

operating budget

31

What is shown on income statement?

  • revenue
  • expenses
  • net income or loss

32

example of payroll taxes

  • income tax
  • state tax
  • social security
  • medicare
  • unemployment tax

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

state income tax

34

expenses that change every month

variable expenses

ex. electric bill, phone bill, food

35

What are the goals of a business budget?

  • 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

36

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

overtime earnings

37

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

net income

38

What is the purpose of the income statement?

to determine how business is performing

39

What are the main purposes of a business budget?

  • 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

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

owner's equity

41

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

income statement

42

the financial record of employee compensation, deductions and net pay

payroll

43

required federal and state payments for each employee

payroll taxes

44

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

payroll deductions

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

earnings report

aka pay stub

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

cash budget

47

business expenses are greater than income

net loss

48

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

accounts payable record

49

What information is contained in a payroll record?

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

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

Medicare tax

51

expenses that are the same every month

fixed expenses

ex. rent, mortgage, insurance premiums

52

What is shown on balance sheet?

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

53

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

expenses

54

What is the difference between gross pay and net pay?

  • 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

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

federal income tax

56

business debts that will continue for longer than a year

ex. loan on land, buildings or equipment

long term liabilities

57

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

employee payroll records

58

What factors influence income?

  • 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

59

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

net pay

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

balance sheet

61

business revenue is greter than expenses

net income

62

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

depreciation record

63

costs of operating a business

expenses

64

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

operating budget

65

all income that a business receives over a period of time

revenue

66

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

gross pay

67

the financial record of employee compensation, deductions and net pay

payroll

68

What are 3 types of expenses?

  1. fixed
  2. variable
  3. periodic