Ch 24 Bus Prac

Question 1

The company is owned by the individual and operates under the indiv. name or company name. Owner personally liable for all debts and losses of the compnay.

Answer 1

Sole proprietorship

Question 2

Two or more people share in the management, profits, and risks of the business. Responsible for the actions of the other and taxed at an individual rate.

Answer 2

General partnership

Question 3

General partners invest in the company, manage it, and are financially responsible. Limited partners are simply investors and receive a portion of the profits. Have no say in the running of the company and are liable only to the extent of their investment.

Answer 3

Limited parntership

Question 4

Association of individuals, created by statutory requirements, having an existence independent from its members. Financially and legally independent from its stockholders. Taxed at a lower rate than are individuals. Taxed on profits and taxed on dividends.

Answer 4

Corporation

Question 5

Certain eligability requirements and offer all the advantages of a standard corporation, but the profits and losses are paid or deducted from the stockholders personal income taxes in proportion to the shares of the stock they hold.

Answer 5

S corporation

Question 6

For professionals like lawyers, interior designers, architects, etc. Similar to other coportations except that liablility for malpractice is generally limited to the person responsible.

Answer 6

Professional corporation

Question 7

Particular requirements vary for each state. Formed like a partnership where the investors are called members and those who manage are called managers. Liability is limited to a member’s investment; a member has no personal liability. Taxed as a partnership or corporation, at the owners discretion, with only one level of taxation for members.

Answer 7

Limited Liability Company (LLC) or Limited Liability Partnership (LLP)

Question 8

Temporary association of two or more persons or firms for the purpose of completing a project. Formal, written agreement developed. Treated as partnerships and cannot be sued as a corporation can.

Answer 8

Joint venture

Question 9

Project moves through an office from one department to another.

Answer 9

Departmental organization

Question 10

Protects the designer in case some action by the designer causes bodily injury or property damage. Covers things like incorrect specifications, mistakes on drawings, and incorrect installation of furniture.

Answer 10

Professional liability insurance

Question 11

Includes a range of insurance to protect against claims of property damage, liability, and personal injury caused by the designer or employees, consultants, or other people hired by the designer. May include a product liability insurance. Sometimes the designer will also buy insurance that will cover the possibility that the contractors or subcontractors do not have their own valid insurance.

Answer 11

General liability insurance

Question 12

Protects the designer’s building and its contents against disasters such as fire, theft, and flood. Even if the designer rents space this can protect the contents and any stock the designer may be holding for the client.

Answer 12

Property insurance

Question 13

Covers liability and property damage to vehicles owned and used by the business.

Answer 13

Automobile insurance

Question 14

Mandatory in all states and protects employees in the event of work-related injuries.

Answer 14

Workers compensation insurance

Question 15

Requires that a contractor carry insurance that will protect from the following. Workers compensation. Damages due to bodily injury, occupational sickness, or death of employees. Claims for personal injury, which include slander, libel, false arrest, and similar actions. Claims for damages other than to the work because of destruction of tangible property. This includes loss of use resulting from damages. Claims for damages related to the use of motor vehicles. In addition, the contractor must carry insurance for any portions of the work that are stored off site or that are in transit to the site.

Answer 15

General Conditions of the Contract (Contractors insurance)

Question 16

Claims from suppliers of goods or services not yet paid for.

Answer 16

Accounts payable

Question 17

Money that others owe to the business through invoices for services.

Answer 17

Accounts receivable

Question 18

Any type of tangible or intangible resources that can be measured in monetary terms.

Answer 18

Assets

Question 19

List of the various accounts a business uses to keep track of money along with corresponding account numbers used for data processing.

Answer 19

Chart of accounts

Question 20

Resources of a business that are converted into cash within one year.

Answer 20

Current assets

Question 21

All labor of technical staff, principles, and support staff that is directly chargeable to projects.

Answer 21

Direct labor

Question 22

The expense of employee salaries plus the cost of madatory and discretionary expenses and benefits such as payroll taxes, health insurance, etc.

Answer 22

Direct personnel expense

Question 23

Voluntary distribution of profits to owners and non-owners, such as performance bonuses, profit sharing, etc.

Answer 23

Discretionary distribution

Question 24

Resources that are used by the business and that are long-term items, such as equipment and property.

Answer 24

Fixed assets

Question 25

All the revenue generated by a business for a period of time stated.

Answer 25

Gross revenue

Question 26

All labor not charged to a project or a revenue-producing account, such as admin, etc.

Answer 26

Indirect labor

Question 27

Claims by people outside the business and claims by the owners of the business against the total assets of the business.

Answer 27

Liabilities

Question 28

Expenses incurred in order to keep a business operating whether or not any revenue is being generated, such as rent, power, and telephone.

Answer 28

Overhead

Question 29

Revenue and expenses are recognized at the actual time the business receives the cash or pays a bill.

Answer 29

Cash accounting

Question 30

Revenue and expenses are recognized at the time they are earned or incurred, whether or not cash changes hands.

Answer 30

Accrual accounting

Question 31

Summarizes all assets and liabilities and shows the financial position of a business. All assets listed must equal liabilites listed.

Answer 31

Balance sheet

Question 32

Total assets less the total liabilites.

Answer 32

Net worth

Question 33

Money invested in a business by the owners and stockholders.

Answer 33

Owners equity

Question 34

Lists all the income and expenses of a business for a certain period of time.

Answer 34

Profit and loss statement

Question 35

Shows actual inflows and outflows of cash or cash equivalents.

Answer 35

Cash flow statement

Question 36

Summarizes each project in the office in terms of the amount of revenue it has generated, expenses, unbilled services, percent complete, and profit or loss to date.

Answer 36

Office earnings report

Question 37

Shows the status of all invoices for all projects.

Answer 37

Aged accounts receivable report

Question 38

Percentage of time, or dollars, spent on direct labor divided by the total time or dollars spent on direct and indirect labor in addition to vacation, holiday, and sick leave.

Answer 38

Chargeable ratio (or utilization rate)

Question 39

Total current assets divided by total current liabilites.

Answer 39

Current ratio

Question 40

The percentage of profit based on net revenue, total annual revenue less consultant’s fees and reimbursable expenses.

Answer 40

Net profit before taxes

Question 41

The ratio of total office overhead to total direct labor.

Answer 41

Overhead rate

Question 42

Refinement of the current ratio and includes only cash and equivalents, plus accounts receivable, divided by total current liabilities.

Answer 42

Quick ratio

Question 43

The amount of net revenue produced per technical staff member.

Answer 43

Revenue per technical staff

Question 44

The amount of net revenue produced per staff member per year, including part-time people and principles.

Answer 44

Revenue per total staff

Question 45

Based on the amount an employee is paid (salary rate) plus the cost for fringe benefits, office overhead, and allowance for profit.

Answer 45

Billing rate

Question 46

Used to determine billing rates. A factor derived by dividing net revenue of the design firm by the cost of direct labor. Covers fringe benefits, indirect labor, overhead, and profit.

Answer 46

Net multiplier

Question 47

The costs of providing taxes, benefits, and the like are included in the employee’s base salary.

Answer 47

Direct Personnel Expense (DPE)

Question 48

Allows the designer to pass on the state sales tax to the client.

Answer 48

Sales tax license (resale license)

Question 49

Who the employee may work for after leaving the present employer.

Answer 49

Noncompete clause (restrictive clause)

Question 50

Interior designer’s conduct. Should interact with contractor or vendor/ not get in the way/inform them of information that may affect the job’s progress, including any problems or errors observed.

Answer 50

Implied duties

Question 51

The legal responsibility for injury or damage to another person or property.

Answer 51

Liability

Question 52

Knowledge shared with another or others regarding a private matter.

Answer 52

Privity

Question 53

Attempt to hold harmless both the owner and the interior designer for any damages, claims, or losses resulting from the performance of any work on the project, whether by the contractor or others with whom the interior designer has no contractural relationship.

Answer 53

Indemnification clauses