Liabilities

Question 1

Liabilities

Answer 1

The financial obligations a business owes to external parties

Question 2

Current liabilities

Answer 2

Amounts due to be paid within one year
- Give insights into the business’s ability to pay its debts using the revenue it generates

Ex: accounts payable, payroll liabilities, current business loans, credit card balances, income tax liabilities

Question 3

Long-term liabilities

Answer 3

Amounts due to be paid in a year or more

Ex: mortgage, long-term loans, vehicle payments

Question 4

Why might a business CHOOSE to maintain longterm liabilities?

Answer 4

-to maintain cash reserves
-use the money to invest in other lucrative investments

Question 5

Deferred revenue

Answer 5

Money received in advance by a business for goods and services it has not yet provided

Question 6

How is a purchase of a gift card recorded on financial statements? Why?

Answer 6

As deferred revenue, a liability, because the payment has been made in advance for goods and services not yet received.

Question 7

FICA

Answer 7

Federal Insurance Contributions Act

-taxes going into Medicaire and Social Security

Question 8

OASDI

Answer 8

Old Age, Survivors, and Disability Insurance tax
-part of FICA

Question 9

HI

Answer 9

Hospital Insurance
-also called the Medicaire Tax
-part of FICA

Question 10

FUTA

Answer 10

Federal Unemployment Tax Act
-a payroll tax that only the employer pays

Question 11

SUTA

Answer 11

State Unemployment Tax Act
-funds state-administered unemployment programs
-only paid by employers

Question 12

SDI

Answer 12

State Disabilities Insurance
-payroll tax that funds employees if they are injured on the job
-only used in some states

Question 13

Non-exempt employee

Answer 13

Eligible for overtime pay and benefits once they have work over 40 hours in a week

Question 14

Are hourly employees typically exempt or non-exempt?

Answer 14

Non-exempt (eligible for overtime pay)

Question 15

Exempt employee

Answer 15

An employee that is not eligible for overtime pay

Question 16

Are salaried employees typically exempt or non-exempt?

Answer 16

Exempt (not eligible for overtime pay)

Question 17

FLSA

Answer 17

Fair Labor Standards Act
-establishes things such as minimum pay rules, child labor laws, overtime pay rules
-requires employees to keep records of pay and time

Question 18

What is the purpose of a W-4? What is it’s full name?

Answer 18

-a tax form completed by the employee upon hiring and returned to the employer
-ensures taxes are being withheld from the employee’s paycheck at the rate established by the employee
-also known as the Employee’s Withholding Certificate

Question 19

W-2 Form

Answer 19

-a tax form that reports an employee’s annual wages and withheld taxes
-issued by business owner to employees no later than Jan. 31st

Question 20

Form 941

Answer 20

A tax form businesses file quarterly to report payroll information to the IRS and to pay Medicaire and Social Security taxes for the previous quarter

Question 21

Form 944

Answer 21

-an alternative to Form 941 for small businesses with a yearly tax liability of $1000 or less
-allows employers to report and pay payroll taxes once a year

Question 22

Form W-9

Answer 22

-filled out by an independent contractor and given to the business/employer so the business/employer has the correct information to file the 1099 at the end of the year

Question 23

1099 Form

Answer 23

Issued by employers/businesses to independent contractors who made at least $600 over the calendar year
-must be issued no later than Jan. 31st and copies submitted to IRS