Office Accounting Exam 3 Flashcards Preview

Trakesha's 4th Quarter > Office Accounting Exam 3 > Flashcards

Flashcards in Office Accounting Exam 3 Deck (69):
1

consists of stamping or writing the depositor's name and sometimes other information on the back of a check, in space provided near the left end

endorsement

2

what are the two types of endorsements?

blank
restrictive

3

a type of endorsement; the deposit simply signs the back of the check. This makes the check payable to any bearer

blank endorsement

4

a type of endorsement; the depositor adds words such as "For deposit," "Pay to any bank," or "Pay to Daryl Beck only" to restrict payment of the check

restrictive endorsement

5

a document ordering the bank to pay cash from a depositor's account

check

6

three parties to a check

drawer
drawee
payee

7

the depositor who orders the bank to pay the cash

drawer

8

the bank on which the check is drawn

drawee

9

the person being paid the cash

payee

10

a statement of account issued by a bank to each depositor once a month

bank statement

11

reasons for differences between bank and book balances (6)

deposits in transit
outstanding checks
service charges
collections
not sufficient funds (NSF) checks
errors

12

how do you establish a petty cash fund?

write a check to the petty cash custodian for the amount to be set aside in the fund.

13

what type of account is petty cash?

asset

14

a receipt that shows the name of the payee, the purpose of the payment, and the account to be charged for the payment.

petty cash voucher

15

a supply of currency and coins kept in a cash register or cash drawer for use in handling cash sales

change fund

16

Compensation for managerial or administrative services

Expressed in biweekly, monthly, or annual terms

salaries

17

one who works under the control and direction of an employer

employee

18

one who performs a service for a fee and does not work under the control and direction of the company paying for the service

independent contractor

19

Compensation for skilled and unskilled labor

Expresses in terms of hours

wages

20

Require employers to pay overtime (1 ½ times the regular rate) to any hourly employee who works over 40 hours in a week

Some salaried employees are exempt from the these rules

Fair Labor Standards Act (FLSA)

21

When compensation is based on time, a record must be kept of the time worked by each employee

computing total earnings

22

Helen worked 55 hours. Regular rate is $12 per hour. She is paid 1 ½ times regular rate for hours in excess of 8 on Monday through Friday and any hours worked on Saturday, and twice the regular hours for hours on Sunday. She worked 4 hours on Sunday

40 hours × $12 per hour = $480
11 hours × $18 per hour = $198
$12 x 1 ½ = $18 overtime rate
4 hours × $24 per hour = $96
Total earnings for the week $774

23

an employee's total earnings

gross pay

24

various deductions are made from gross pay to yield this

net pay
"take home" pay

25

deductions from gross pay fall into three categories:

federal (and possibly state and city) income tax withholding

employee FICA tax withholding

voluntary deductions

26

four factors that determine the amount of income tax to be withheld from an employee's gross pay each pay period

total earnings
marital status
number of withholding allowances claimed
length of the pay period

27

exempts a specific dollar amount of an employee's gross pay from federal income tax withholding

withholding allowance

28

a method of determining the amount to withhold from an employee's gross pay for a specific time period.

wage bracket method

29

FICA taxes include amounts for what

Social Security
Medicare program

30

what is the rate for Social Security deductions

6.2% on maximum earnings of $117,000

31

what is the rate for Medicare deductions

1.45%; there is no maximum

32

payroll records should include the following information for each employee

1. name, address, occupation, SSN, marital status, and number of withholding allowances
2. gross amount of earnings, date of payment, and period covered by each payroll
3. gross amount of earnings accumulated for the year
4. amounts of taxes and other items

33

three types of payroll records are used to accumulate the payroll records

1. payroll register

2. payroll check (or record of direct deposit) with earnings statement attached

3. employee earnings record

34

a form used to assemble the data required at the end of each payroll period

payroll register

35

a separate record of each employee's earnings

employee earnings record

36

wages and salaries expense is (credited/debited) for the gross pay of all employees for each pay period.

debited

37

federal income tax payable is (credited/debited) for employee's earning

credited

38

the federal income tax payable is (credited/debited) when it is paid to the IRS

debited

39

Medicare and Social Security taxes payable are (debited/credited) when they are withheld from employee's wages

credited

40

Medicare and Social Security taxes payable are (debited/credited) when they are paid the appropriate entity

debited

41

In addition to the gross pay for each employee, the employer must pay payroll taxes, which include

Federal income tax
FICA (Social Security/Medicare)
FUTA
SUTA

42

most employers must pay

Federal income tax
FICA (Social Security/Medicare)
FUTA
SUTA

43

Both the employee and employer pay an equal share of this

FICA taxes

44

Given to each employee by January 31

Shows the total amount of wages paid and taxes withheld during the preceding taxable year

Prepared from the employee earnings record

Wage and Tax Statement W-2

45

Sent by employers with Copy A of Forms W-2 to the Social Security Administration

Due by February 28 following the end of each taxable year

Summarizes employee earnings and tax information presented on Forms W-2 for the year

Transmittal of Wage and Tax Statement

46

Worker’s compensation insurance

Provides insurance for employees who suffer job-related illness or injury

Required by most states

The employer usually pays the entire cost

The rate depends on the:
Number of employees
riskiness of the job
company’s accident history. (The state of Texas does NOT mandate this)
The employer usually pays the premium at the beginning of the year, based on the estimated payroll for the year

The year-end adjustment is made when the actual payroll is known

47

a written promise to pay a specific sum at a definite future date. Also called a note. Often used when credit is extended for 60 days or more, or when large amounts of money.

Promissory note

48

The months or days from the date of issue of a note

date of maturity

49

what is the formula for calculating interest

principal x rate x time

50

a process in which ratios computed from accounting data are compared and analyzed to develop insights about a company’s risks and performance. Useful when you want to compare your business to other similar businesses. Lenders will use ratios when you go to borrow money

ratio analysis

51

what is the formula for current ratio

current assets
______________
current liabilities

52

what is the formula for current ratio

current assets/ current liabilities

53

what is the rule of thumb for current ratio

2 to 1

54

measures the ability of the company to pay current liabilities. Shows how well a company can meet its obligations without having to liquidate or depend too heavily on its inventory.

Acid-test/Quick ratio

55

formula for acid test ratio

quick assets
_________
current liabilities

56

formula for acid test ratio

quick assets/current liabilities

57

what is the ratio for acid test

1 to 1

58

what is the formula for A/R turnover

sales
_____
avg. A/R balance

59

what is the formula for A/R turnover

sales/avg. A/R balance

60

average time to collect receivables

age of A/R

61

what is the formula for age of A/R

365
_____
AR turnover

62

measures how many times a company’s inventory has been sold during the year

inventory turnover

63

what is the formula for inventory turnover

cost of goods sold
______________
avg inventory balance

64

days taken to sale inventory

Age of inventory

65

measures how much out of every dollar of sales a company keeps in earnings

Profit margin

66

what is the formula for profit margin

net income
_________
net sales

67

represents the % of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold by a company

gross profit percentage

68

what is the formula for gross profit percentage

Net sales – cost of goods sold
_______________
Net sales

69

acid test-ratio also called

quick ratio