Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

UBC Real Estate Licensing Exam > Chapter 3.1: Financial Stataements > Flashcards

Chapter 3.1: Financial Stataements Flashcards

1
Q

A _______________ is an individual owner of their business and they ______________ separate business from personal

A

Sole proprietorship

Cannot

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

For a sole proprietorship, the liability is __________, meaning?

A

Unlimited

The owner is personally liable for all debts incurred by the proprietorship

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

With a sole proprietorship, can creditors go after personal assets?

A

Oh yes they can!

As business is personal is not separate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

With a sole proprietorship, __________ and ___________ are part of an owners taxable situation

A

Profits and losses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

With a sole proprietorship, they must report business income on their ________________

A

Personal tax returns

Sole proprietorship does not file its taxes separately from the principal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

A _______________ has 2+ partners and you cannot seperate business and personal

A

General partnership (GP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Liability in a general partnership is ____________, and how do creditors come after your assets?

A

Unlimited

Creditors can go after personal assets; each general partner becomes personally liable for all general partners debts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How do partnerships file their taxes?

A

Each partner must claim income / loss on their personal income tax

They must report their income on their personal tax returns

The general partnership itself isn’t subject to income tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

A _____________ is made up of general and limited partners. And the limited partners have no right to take part in _________________________________. It’s the _________________ who run the business

A

Limited partnership

Day to day operations

General partners

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

In a limited partnership (LP), there has to be 1+ ___________ and 1+ _______________.

Neither party can separate business and personal for assets

A

General partner

Limited partner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

The liability in a limited partnership is __________ for the general partner and ____________ for the limited partner

A

Unlimited - creditors can go after personal assets

Limited - liability limited to their investment

(Have no right to take part in day to day operation)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How does taxes work on a limited partnership

A

All partners claim income / loss according to their share in the company

Partners have the same income tax status

LP itself is not subject to income tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

A ___________ never dies

A

Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

A corporation exists until it’s terminated by an act by ________________

A

All shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

A corporation is a _____________, meaning it is a seperate legal entity

A

Legal fiction

Or fictional person

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

With a corporation, _________ are limited to their own equity

A

Shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

In a corporation, who manages the company?

A

The board of directors!

Not the shareholders silly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Liability of a corporation is limited to just the __________. Also, a corporation can sue or be _______

A

Corporation

Sued

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Individuals who acquire shares in a company do not own the ________ of the company

A

Assets

Imagine owning apple headquarters , wow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Corporations are ______ And it has its own income status this mean it is subject to _______________

A

Taxable entities

Income tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

PREC STAND FOR WHAT?

A

Personal real estate corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the main purpose of a personal real estate corporation (PREC)

A

Income / tax planning

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

One benefit to a PREC is _______________, meaning it has business accounting / expenses

A

Business taxation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Another benefit to PREC’s is ________________, meaning non-voting shares can go to the spouse and children, reducing taxes payable

A

Income splitting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Another benefit to PREC’s is ____________, meaning income may be retained in the corporation, with personal taxes only paid once __________ are distributed

A

Tax deferral

Dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

The last benefit to a ______ is low tax rates for corporations

A

PREC (Personal Real Estate Corporation)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

A PREC protects personal assets BUT the ________ remains personally liable for actions related to provisions of real estate services

A

Licensee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What are some costs associated with a PREC

A
  • accounting cost for both establishing and maintain a PREC
  • requires double the real estate licensing fee
  • requires double the errors and omissions insurance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Difference between public and private corporation

A

Whether or not the shares are traded on stock market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

When doing business with a corporation, you can conduct a corporate search to find out 6 things, which are

A

1) status
2) address
3) incorporation (recognition) date
4) previous company names
5) names of registered directors / officers
6) when last annual report was filed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Purpose of a Corporate search: status

A

Determine Whether it’s active or inactive

Or if it has been involuntarily dissolved

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Corporate search: incorporation (recognition) date

A

When the corporation was registered (aka started)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Purpose of a Corporate search: when the last annual report was filed

A

Determine whether the corporation is in good standing (filed its annual returns)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What are the 6 accounting principles

A

1) cost principle (aka historic cost)
2) revenue recognition
3) matching principle
4) objectivity principle
5) consistency principle
6) materiality principle

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Cost principle (aka historic cost principle)

A

Record the amount paid for an asset

Easy: what you paid for, at the time of purchase)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Example of cost / historic cost principle

Joe buys a car for his real estate business. What amount should be recorded in his firms accounts?

1) ICBC insurable value is $60,000
2) list price was $68,000
3) joe negotiated and paid $62,000
4) the cars market value is appraised at $63,000

A

3) Joe negotiated and paid $62,000

Keyword: PAID

37
Q

Revenue recognition principle is what?

A

Revenue should be recognized (put into the books) when earned, not necessarily when received

38
Q

Example of revenue recognition principle

Joe has helped sell a property and gets a $10,000 commission check

1) December 1, 2021: subject clauses removed and deposit paid
2) January 15th, 2022: completion date (money is paid)

Are taxes payable in 2021 or 2022 

A

2021 - as this was the time the money was earned and not paid

39
Q

Matching principle

A

Expenses should be recognized and deducted in the same period as the revenues they generated

Recognized when incurred, not necessarily when paid

40
Q

Objectivity principle

A

All amounts must be objective and verifiable (example: by a third party)

41
Q

The objectivity principle is closely aligned to the ___________ because the best way to ensure objectivity in accounting transactions is to record the amount of consideration given up at the date of transaction

A

Cost principle

42
Q

Consistency principle

A

Once a principle is adopted, it should be used in future years

43
Q

Consistency principle: The changes to accounting principles should only be made or the change result in providing more __________ and ___________ information to the user of the financial statements

A

Relevant and useful

44
Q

Materiality principle

A

Is an exception to the matching principal.

The financial reports only have to include information that will be significant (material) to the users

45
Q

The ____________ can never be changed (hint in taxation)

A

Fiscal year

46
Q

_________________ could be changed but the tax year cannot be longer than _____ weeks

A

Corporation tax year

53

47
Q

Balance sheet

A

Listing of the assets, liabilities, and owners equity of a business at a specific point in time

48
Q

Assets are things that you _____

A

Own!!

49
Q

Examples of assets you will see on a financial statement balance sheet

A 
Current:
Cash, 
account receivable (AR)
Pre-paid expenses 
Inventories

Non-current:
Cars
Land
Buildings

50
Q

A ______ asset is one that will be payed within a year

A

Current

51
Q

A ______________ will take more than 1 years

A

Non current asset

Stays on books for more than a year

52
Q

_____ are things that you owe

A

Liabilities

53
Q

Examples of liabilities

A

Current:
Credit card payable, accounts payable, wages payable taxes, tenant deposits

Non-current liability
Car loan payable, mortgages

Hint- payable

54
Q

Current assets are things that will ________________

A

paid off in 1 year

55
Q

Non current liabilities are things that will take more than __________ ____

A

1 year to pay off

56
Q

And with assets and liabilities, don’t forget ____________

A

Owners equity

57
Q

No ______________ will be shown on a corporation

A

Shareholders names

58
Q

Hint to remember the 3 components on a balance sheet

A

BAL

Balance sheet = assets - liabilities

59
Q

Formula 1: ALOE

A

Assets = liabilities + owners equity

60
Q

Formula 2: shareholders equity =

A

Shareholder equity = share capital + retained earnings

61
Q

Income statement definition

A

Listing of revenue and expenses of a business for a given period

62
Q

Acronym for the income statement

A

RENI

Revenue - expenses = net income

63
Q

In the statement of cash flows, changes in depreciation expense be recorded under ___________

A

Operating activities

64
Q

Examples of revenues

A

Sales, commissions, interest, service, rent revenue

65
Q

Examples of expenses

A 
Cost of production 
Operation expenses 
Interest payment
Income taxes 
Car - depreciation
66
Q

Straight Line depreciation is not _________________

A

Tax deductible

You cannot deduct this from income

67
Q

2 types of depreciation expense

A

1) straight like depreciation

2) CCA

68
Q

Straight line depreciation formula

A

Annual depreciation = (cost - salvage value) / estimated life

69
Q

Straight line depreciation example

Car cost = $20,000
Economic life = 10 years
Salvage value: $2,000

A

So ($20,000-2,000) / 10

= 1,800

70
Q

Depreciation expense

A

Method used to allocate the cost of asset over time

71
Q

Important: ________ never depreciates!!

A

LAND
LAND
LAND LAND

72
Q

CCA is considered _____________

A

Tax deductible

Meaning you can deduct it from your income

73
Q

CCA, rule 1, first year

A

1st year rule: only 1/2 available CCA% can be deducted in the 1st year

74
Q

CCA last year rule

A

Last year rule: nothing can be deducted!!

0%

75
Q

CCA example - class 10 car (30% CCA)

Undepreciated capital cost = 20,000

A

1st year: 20,000 x 0.15
=3,000
20,000-3000= 17,000

2nd year: 17,000 x 0.3
=5,100
17,000-5100= 11,900

3rd year: 11,900 x 0.3
= 3,570
11,900 - 3,570 = 8,330

76
Q

Book value

A

Original cost of your asset minus depreciation to date

77
Q

True or false… A sole proprietorship does not file its taxes separately from the principal

A

True!!

78
Q

True or false… A sole proprietorship is the least common small business ownership model in service industries and has a lifespan that can exceed that of its owner

A

False!!

79
Q

True or false… Limited partners have liability to creditors which is limited to the amount of money that they have invested in the business

A

Yes sir! They can only lose what they put in

80
Q

True or false… Limited partners can be actively engaged in managing the business without any consequences to their partnership status

A

False!!

They cannot do any day to day operations

81
Q

True or false… To conform to the cost principle, it is important to record the asset at what might be considered its fair market value instead of what the enterprise paid for it

A

False!!

82
Q

True or false… The matching principle requires that expenses are always recorded when they are paid, which is not necessarily when they were incurred

A

False!!

83
Q

True or false… The revenue recognition principle states that a business enterprise should recognize revenue when it is earned, not necessarily when the cash is actually received

A

True!!

84
Q

On the balance sheet inventories would be classified under

A

Current assets

85
Q

True or false… The materiality principal is the same as the matching principal where purchasers with relatively low cost such as a stationary or cleaning supplies may be added to the books when paid for

A

False!

They opposites , not the same

86
Q

Rents receivable are listed as ________ on the financial statements of a business

A

Current assets

87
Q

A company has just bought a truck for $22,500. It is expected that the truck can be sold for $3000, 15 years from now. The current market value of the vehicle is $27,000. Using the straight-line method, what is the annual depreciation expense?

A

22,500 - 3000 = 19,500 / 15

= $1,300

88
Q

ABC Inc. paid $155,000 for an asset on which the income tax act allows capital cost allowance. The asset was purchased five years ago, and will be disposed at the end of this year. How much CCA will be claimed by ABC Inc. at the end of this year?

A

$0!

Last year rule = 0 depreciation fool

UBC Real Estate Licensing Exam (24 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions