ACCOUNTING Flashcards
1
Q
What are ASSETS?
A
things of value that are owned by a business
provide a future economic benefit
2
Q
What are LIABILITIES?
A
Present a future obligation
3
Q
In regards to assets vs. liabilities, what is an indicator of a successful business?
A
Higher proportion of assets to liabilities – indicates a higher degree of liquidity
4
Q
What is the OWNER’S EQUITY equation?
A
ASSETS - LIABILITIES = OWNER’S EQUITY
5
Q
What is the STATEMENT OF CASH FLOWS?
A
Financial report that shows a company’s sources + uses of cash during one accounting period.
6
Q
What is a financial report that shows a company’s sources + uses of cash during one accounting period?
A
Statement of Cash Flow
7
Q
In regards to accounting, what provides a future economic benefit?
A
Asset
8
Q
In regards to accounting, what presents a future obligation?
A
Liability
9
Q
To calculate OWNER’S EQUITY, what do you subtract from Assets?
A
Liabilities
10
Q
What shows a company’s operational results (performance)?
A
Income Statement
11
Q
What is an INCOME STATEMENT?
A
Financial report that shows a company’s operation results or performance.
12
Q
Name 2 accounting methods.
A
Accrual + Cash Basis
13
Q
Name 4 inventory valuation methods
A
FIFO, LIFO, Specific Valuation + Weighted Average
14
Q
What is ACCRUAL ACCOUNTING?
A
Recording of expenses when incurred + income / sales revenue when earned regardless of the dates they occurred.
15
Q
What type of accounting method is the most accurate representation of the financial results + financial position of the company?
A
Accrual Accounting
16
Q
What is CASH BASIS ACCOUNTING?
A
Recording of cash when received + expenses when cash has been paid out.
17
Q
What is the simplest accounting method?
A
Cash Basis (used mainly by small businesses with no inventory)
18
Q
Name 2 different inventory methods to track the quantity of goods on hand.
A
Periodic + Perpetual
19
Q
What is the PERIODIC INVENTORY SYSTEM?
A
Occasional physical count of the inventory to determine the ending inventory balance + COS.
20
Q
Which inventory system occasionally physically counts the inventory to determine the ending inventory?
A
Periodic
21
Q
What is the PERPETUAL INVENTORY SYSTEM?
A
Continuously updating inventory as it occurs + allows for the daily running balance of inventory available
22
Q
Which is more “sophisticated” inventory system – perpetual or periodic?
A
Perpetual
23
Q
Which inventory system ALWAYS has a COS entry?
A
Perpetual
24
Q
_____ + _____ = GA
A
Beginning Inventory (BI) + Purchases (P)
25
BI + P = _____
Goods Available (GA)
26
In regards to the Periodic inventory method, what is BI?
Beginning Inventory (BI)
27
In regards to the Periodic inventory method, what is P?
Purchases (P)
28
In regards to the Periodic inventory method, what is GA?
Goods Available (GA)
29
_____ - _____ = CS
Goods Available (GA) - Ending Inventory (EI)
30
GA - EI = _____
Cost of Sales (CS)
31
In regards to the Periodic inventory method, what is EI?
Ending Inventory (EI)
32
In regards to the Periodic inventory method, what is CS?
Cost of Sales (CS)
33
GA - ____ = CS
Ending Inventory (EI)
34
____ - EI = CS
Goods Available (GA)
35
____ + P = GA
Beginning Inventory (BI)
36
BI + ____ = GA
Purchases (P)
37
In which inventory method / system does this equation belong?
BI + P = GA
Periodic
38
In which inventory method / system does this equation belong?
GA - EI = CS
Periodic
39
During an inflationary period, which method of inventory will result in the HIGHEST cost of food sold?
LIFO
40
During an inflationary period, which method of inventory will result in the LOWEST cost of food sold?
FIFO
41
What is LIFO?
Last In First Out (LIFO) --- the last items received are sold first
42
What is FIFO?
First In First Out (FIFO) --- the first items received are sold first
43
Name 4 Inventory Valuation methods.
LIFO, FIFO, Specific Valuation + Weighted Average
44
In regards to Inventory Valuation methods, which are cost layering methods used to value of COGS + EI?
LIFO + FIFO
45
When the FIFO inventory control method is used, the process requires that ____.
A. the actual cost of each item is recorded
B. the first item received is sold
C. inventory is continually updated
D. newest or last items are sold
B. the first item received is sold
46
When the LIFO inventory control method is used, the process requires that ____.
A. the actual cost of each item is recorded
B. inventory is continually updated
C. newest or last items are sold
D. the last received is sold
D. the last received is sold
47
Leslie's Catering had $10,000 and $12,000 of food inventory at the beginning + end of the year, respectively. Food purchases during the year totaled $240,000 + $3,000 was spent internally on such uses as employee meals. What was the cost of food sold for this operation?
A. $242,000
B. $239,000
C. $235,000
D. $245,000
C. $235,000
10,000 (BI) + 240,000 (P) = 250,000 (GA)
**250,000 (GA) - 3,000 (EXPENSES) - 247,000**
247,000 (GA) - 12,000 (EI) = 235,000 (CS)
48
List 3 things that can affect the control of inventory for sale.
- -shortages + overages
- -costs
- -pilferage
49
List 3 things that can adjust the cost of sales.
- -internal expenses
- -employee meals
- -promotional
50
What is the BREAKEVEN POINT?
Sales volume when a business earns exactly NO MONEY. (revenue = expenses)
51
In regards to the BREAKEVEN POINT, what is FC?
Fixed Costs (FC)
52
In regards to the BREAKEVEN POINT, what is VC?
Variable Costs (VC)
53
In regards to the BREAKEVEN POINT, what is USP?
Unit Selling Price (USP)
54
USP - VC = ____
Fixed Costs (FC)
55
____ - VC = FC
Unit Selling Price (USP)
56
USP - ____ = FC
Variable Costs (VC)
57
What is a FIXED COST (FC)?
A cost that does not increase or decrease in conjunction with any activities = specific dollar amount.
58
What is a cost that does not increase or decrease in conjunction with any activities?
Fixed Cost (FC)
59
What is a VARIABLE COST (VC)?
A cost that varies in relation to either production volume or the amount of services provided = percentage of revenue
60
What is a cost that varies in relation to either production volume or the amount of services provided?
Variable Cost (VC)
61
What type of cost tends to be incurred on a REGULAR basis?
Fixed Cost (FC)
62
What is also known as period costs?
Fixed Cost (FC)
63
A company with LOW FIXED COST (FC) generally has a ____ variable cost per unit.
HIGH
64
A company with HIGH FIXED COST (FC) generally has a ____ variable cost per unit.
LOW
65
Which type of cost will decrease the most on a per unit basis as sales increase?
A. mixed
B. variable
C. fixed
D. food
C. fixed
66
____ X ____ = total VC
total # of units produced X variable cost per unit = total VC
67
____ X variable cost per unit = total VC
total # of units produced
68
total # of units produced X ____ = total VC
variable cost per unit
69
The profits earned by your business are 20% of the revenue generated by sales. Poor scheduling has resulted in $200 of unnecessary costs. How much must your operation generate in additional sales to pay for the extra $200 in labor costs?
A. $200
B. $400
C. $800
D. $1,000
D. $1,000
70
FC / (USP - VC) = _____
Breakeven Point (BEP)
71
____ / (USP - VC) = BEP
Fixed Costs (FC)
72
FC / ( ____ - VC) = BEP
Unit Selling Price (USP)
73
FC / (USP - ____ ) = BEP
Variable Costs (VC)
74
Lunchtime Express has a contract to provide lunches at $5.25 per meal. If its fixed costs are $3,000 per week and its variable costs are $2.25 per meal, how many lunches must be sold in order to break even?
A. 595
B. 855
C. 1,000
D. 1,333
C. 1,000
3,000 / (5.25-2.25)
75
COST OF SALES
sales revenue item* / total sales revenue = _____
* price item
* cost of sales food
* cost of sales beverage
% of total sales revenue
76
COST OF SALES
____* / total sales revenue = % of total sales revenue
* price item
* cost of sales food
* cost of sales beverage
sales revenue item
* price item
* cost of sales food
* cost of sales beverage
77
COST OF SALES
sales revenue item* / _____ = % of total sales revenue
* price item
* cost of sales food
* cost of sales beverage
total sales revenue
78
The forecasted yearly sales for Sue's Catering are $800,000. Profit requirements for the year total $90,000 and non-food expenses (including labor) have been estimated at $410,000. Assuming forecasts are accurate, what would the budgeted food cost percentage be in order to ensure that profit requirements are minimally met?
A. 10-12%
B. 24-26%
C. 36-38%
D. 45-47%
C. 36-38%
800,000 - 410,000 = 390,000 - 90,000 = 300,000
300,000 / 800,000 = 37.5%
79
The owner of Papa's Catering is demanding a year end net income of $80,000. Assuming a tax rate of 35% what will pre-tax income have to equal to satisfy the owner's demands?
A. $108,000
B. $115,824
C. $123,077
D. $132,000
C. $123,077
80,000 / .65 = 123,077
80
Most organizations in the hospitality industry (hotels, motels, resorts, restaurants + clubs) use the _____ appropriate to their particular segment of the industry
Uniform System of Accounts
81
Which system was designed for classifying, organizing + presenting financial information so that uniformity prevailed + comparison of financial data among hotels was possible.
Uniform System of Accounts
82
What is an advantage of the UNIFORM SYSTEM OF ACCOUNTS?
Information can be collected on a regional or national basis from similar organizations within the hospitality basis.
83
Examples of ASSETS for an off-premise caterer?
- -cash
- -accounts receivable
- -food + other types of inventory
- -prepaid expenses
- -fixed assets (land, buildings, vehicles, etc.)
84
What are EXPENSES?
Outflow of assets consumed to generate sales revenue
85
In regards to OWNER'S EQUITY, equity _____ if revenues exceed expenses (R > E).
increases
86
In regards to OWNER'S EQUITY, equity _____ if revenues are less than expenses (R < E).
decreases
87
Examples of LIABILITIES?
- -accounts payable
- -accrued expenses (unpaid wages/salaries, payroll tax, etc.)
- -income tax payable
- -deposits + credit balances (advanced deposits that have not been earned)
88
Examples of OWNERSHIP EQUITY?
- -capital stocks
- -paid-in capital, excess of par (also known as capital surplus)
- -retained earnings
- -dividents payable
89
What are the 3 types of ownership?
Sole Proprietorship, Partnership + Corporation
90
What is a business entity that may use the titles of proprietor's capital, proprietorship, equity, proprietorship net worth or owner's equity?
Sole Proprietorship
91
What is a SOLE PROPRIETORSHIP?
A business entity that may use the titles of proprietor's capital, proprietorship, equity, proprietorship net worth or owner's equity.
92
What is an unincorporated business owned by two or more individuals?
Partnership
93
What is a PARTNERSHIP?
An unincorporated business owned by two or more individuals.
94
What is an incorporated, artificial person who protects individual investors (stockholders) from personal liability + continues its existence through easy transfer of stock?
Corporation
95
What is a CORPORATION?
An incorporated, artificial person who protects individual investors (stockholders) from personal liability + continues its existence through easy transfer of stock.
96
What is the purpose of a BALANCE SHEET?
To provide a specific point in time a picture of the financial condition of a business entity relative to its assets, liabilities + ownership equity.
97
What provides a SNAPSHOT of the company's financial position in time?
Balance Sheet
98
What are the components of a BALANCE SHEET?
Assets, Liabilities + Ownership Equity?
99
What is the purpose of an INCOME STATEMENT?
To show economic results of profit motivated operations of a business over a specific operating period.
100
When you think about the ____, think about the information that reveals a company's performance.
Income Statement
101
An INCOME STATEMENT, depicts a company's ____ OR ____.
profit or loss
102
Most hospitality operations are ____, and the income statement needs to show the operating results _________ as well as for _______.
departmentalized
department by department
the operation as whole
103
What shows departmental revenue MINUS its direct costs to arrive at income BEFORE tax?
Departmental Contributory Income
104
What is Departmental Contributory Income?
Shows departmental revenue MINUS its direct costs to arrive at income BEFORE tax?
105
What shows the company sources + uses of cash one given accounting period?
Statement of Cash Flows
106
What does the Statement of Cash Flows show?
The company sources + uses of cash in one given accounting period.
107
What is Sales Revenue?
An inflow of assets received in exchange for goods or services provided.
108
What is an inflow of assets received in exchange for goods or services perovided?
Sales Revenue
109
What is the sale of goods + services?
Non-operating revenues not directly related to the primary purpose of the business.
110
What are non-operating revenues not directly related to the primary purpose of the business.
Sale of Goods + Services
111
Which Inventory Valuation Method is normally used only for high-cost items, such as high-cost wines + expensive cuts of meats?
Specific Identification / Valuations Method
112
The Specific Identification / Valuation Method records the ____ cost of each item.
ACTUAL or ESTIMATED?
actual
113
Which Inventory Valuation Method should be used during INFLATIONARY periods?
LIFO
114
Which Inventory Valuation Method is relative to inventory items that do not expire / not perishable?
LIFO
115
What is the WEIGHTED AVERAGE COST METHOD?
Calculates a weighted average for each item of inventory available for sale.
116
Which Inventory Valuation Method calculates inventory via a weighted average for each item of inventory?
Weighted Average Cost Method
117
Which Inventory Valuation Method generally produces a higher net income when cost prices are increasing + a lower net income when cost prices are declining?
FIFO
118
Which Inventory Valuation Method is the preferred method used for food inventories?
FIFO
119
What are CONTROLLING COSTS?
A daily function of all successful caterers in which they operate with their eyes wide open always looking for waste + inefficiency.
120
What is a PRIME COST?
The combined cost of food + payroll.
| food cost vs. labor
high vs. low
(low vs. high) = opposite to offset!
121
What are INTERDEPARTMENTAL and INTERDIVISIONAL TRANSFERS?
Charging other outlets for food costs.
EX: concierge (food) --> being charged to room
122
What are 3 Adjustments to Cost of Sales - Food?
- -interdepartmental + interdivisional transfers
- -employee meals
- -promotional expense
123
Where can a COMPARATIVE HORIZONTAL ANALYSIS be found?
Balance Sheet OR Income Statement
124
What does a COMPARATIVE HORIZONTAL ANALYSIS require?
Two consecutive periods of information.
125
What does a COMMON SIZE VERTICAL ANALYSIS require?
Only one period of financial data.
"comparing apples to apples, i.e., month to month"
126
Which of the following would NOT be found on a BALANCE SHEET under the assets column?
A. deposits + credit balances
B. beverage inventory
C. dividends
D. credit card receivable
A. deposits + credit balances
127
Which of the following is considered a LIABILITY?
A. cancellation fee from a holiday party
B. retained earnings
C. deposit for a wedding
D. a broken Hobart food processor
C. deposit for a wedding
128
Which of the following financial reports shows a company's sources + uses of cash during one accounting period?
A. balance sheet
B. income statement
C. statement of retained earnings
D. statement of cash flows
D. statement of cash flows
balance sheet = "snap shot"
income statement = "performance"
129
Which of the following statements shows a company's operational results (performance)?
A. statement of retained earnings
B. income statement
C. statement of cash flows
D. balance sheet
B. income statement
balance sheet = "snap shot"
statement of cash flows = "cash"
130
When the FIFO inventory control method is used, the process requires that ____.
A. newest or last items are sold
B. inventory is continually updated
C. the first item received is sold
D. the actual cost of each item is recorded
C. the first item received is sold
131
During an inflationary period, which method of inventory will result in the highest cost of food?
A. LIFO
B. weighted average
C. FIFO
D. regression cost
A. LIFO
