Chapter 1 Flashcards
What is Bookkeeping?
It is the process of recording and classifying transactions.
What is Accounting?
It is the system of summarizing, interprettnig, and communicating financial data.
What is Budgeting?
It is the process of planning for the coordination of resources and expenditures.
What does a budget reflect?
It reflects the priorities of the business and the resources needed to accomplish them.
What is the goal of the property or facility manager during the holding period of the property?
It is to enhance the value of the property, thus providing a profit potential upon final sale.
How do the property and facility managers use periodic financial reports?
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.
What is the goal of the accountant during the holding period of the property?
To deliver accurate, meaningful and timely financial reports to teh decision makers managing the property.
What are transactions?
They are financial events that are recognozed within a financial statement or report.
Define Revenue Cycle.
The functions required to exchange products or services with customers for cash.
Define Expenditure Cycle.
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.
What is an Account?
An individual records of information and transactions related to each asset or liability and to each aspect of owners equity.
What is a Chart of Accounts?
A detailed listing of the accounts to which income and expenses are assigned.
What is Asset?
Anything of value that is owned.
What is a Liability?
A debt that is owed.
What is Owner’s Equity
The owner’s share or contributions either as an initial investment or as subsequent cash infusions.
What is the Basic Accounting Equation?
Assets=Liabilities + Owner’s Equity
What is a Balance Sheet?
It is a statement of the financial position of a business entity at a particular point in time, reflecting the accounting.
What is true for both sides of the accounting equation?
Both sides of the accounting equation are always equal.
What are the three sets of books that companies typically keep?
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.
What are the major financial transactions that must be monitored during property management?
Tenant Collections
Vendor Payments
Monthly Operating Results
What are three basic external reports
Income Statement
Balance Sheet
Statement of Cash Flows
Define Accrual Basis Accounting.
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)
What is the cash method?
It is the accounting method in which income and expenses are recorded only when received or paid out.
Define Income Statement.
It is a statement prepared on an annual basis reporting net income or net loss from revenues earned and expenses incrued.
What are Accounts Receivable?
It is monies earned, but not yet received, which are recorded as assets on the balance sheet
What are Accounts Payable?
It is debts owed to other businesses which are recorded as liabilities on the balance sheet.
What is a Cash Flow Statement
It is a report that describes the changes in cash from one period to the next.
What are Accounting (Internal) Controls?
Efforts made to safeguard assets, ensure accurate and reliable accounting data, promote efficiency,and adhere to prescribed management policies.
What are Cash Controls?
They are procedures to ensure that cash is properly handled and to combat human error.
How do building owners control costs?
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.
What is a Management Agreement?
It is a document that outlines the scope of the work required to manage the property, the compensation, and the reporting requirements.
What is the basic accounting equation?
Assets=Liabilities+Owner’s Equity
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.
Debit, credit
List the three common financial statements used for external reporting.
The income statement, balance sheet, and cash flow statement.
How do owner’s control costs?
Byassisting in budget preparations, tracking monthly budget variances, and establishing internal controls for purchases.
List several advantages of using purchase orders.
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.
What should be included in a tenant file?
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
What information should be included in a delinquency report?
Scheduled amount of money due and unpaid, length of time amount is past due, actions taken to collect, status of eviction proceedings.
The process of plannig for the coordination of resources and expenditures is known as:
a) accounting
b) reporting
c) budgeting
d) bookkeeping
c) Budgeting
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
b) Enhance the value of the property being managed
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
a) accrual method
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
a) setting internal reporting procedures
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
d) $75,000
