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Nervous Nellies > Office Accounting Exam 3 > Flashcards

Office Accounting Exam 3 Flashcards

1
Q

consists of stamping or writing the depositor’s name and sometimes other information on the back of a check, in space provided near the left end

A

endorsement

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2
Q

what are the two types of endorsements?

A

blank

restrictive

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3
Q

a type of endorsement; the deposit simply signs the back of the check. This makes the check payable to any bearer

A

blank endorsement

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4
Q

a type of endorsement; the depositor adds words such as “For deposit,” “Pay to any bank,” or “Pay to Daryl Beck only” to restrict payment of the check

A

restrictive endorsement

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5
Q

a document ordering the bank to pay cash from a depositor’s account

A

check

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6
Q

three parties to a check

A

drawer
drawee
payee

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7
Q

the depositor who orders the bank to pay the cash

A

drawer

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8
Q

the bank on which the check is drawn

A

drawee

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9
Q

the person being paid the cash

A

payee

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10
Q

a statement of account issued by a bank to each depositor once a month

A

bank statement

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11
Q

reasons for differences between bank and book balances (6)

A 
deposits in transit
outstanding checks
service charges
collections
not sufficient funds (NSF) checks
errors
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12
Q

how do you establish a petty cash fund?

A

write a check to the petty cash custodian for the amount to be set aside in the fund.

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13
Q

what type of account is petty cash?

A

asset

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14
Q

a receipt that shows the name of the payee, the purpose of the payment, and the account to be charged for the payment.

A

petty cash voucher

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15
Q

a supply of currency and coins kept in a cash register or cash drawer for use in handling cash sales

A

change fund

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16
Q

Compensation for managerial or administrative services

Expressed in biweekly, monthly, or annual terms

A

salaries

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17
Q

one who works under the control and direction of an employer

A

employee

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18
Q

one who performs a service for a fee and does not work under the control and direction of the company paying for the service

A

independent contractor

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19
Q

Compensation for skilled and unskilled labor

Expresses in terms of hours

A

wages

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20
Q

Require employers to pay overtime (1 ½ times the regular rate) to any hourly employee who works over 40 hours in a week

Some salaried employees are exempt from the these rules

A

Fair Labor Standards Act (FLSA)

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21
Q

When compensation is based on time, a record must be kept of the time worked by each employee

A

computing total earnings

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22
Q

Helen worked 55 hours. Regular rate is $12 per hour. She is paid 1 ½ times regular rate for hours in excess of 8 on Monday through Friday and any hours worked on Saturday, and twice the regular hours for hours on Sunday. She worked 4 hours on Sunday

A 
40 hours × $12 per hour = $480
11 hours × $18 per hour = $198
$12 x 1 ½ = $18 overtime rate
4 hours × $24 per hour = $96
Total earnings for the week	$774
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23
Q

an employee’s total earnings

A

gross pay

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24
Q

various deductions are made from gross pay to yield this

A

net pay

“take home” pay

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25
Q

deductions from gross pay fall into three categories:

A

federal (and possibly state and city) income tax withholding

employee FICA tax withholding

voluntary deductions

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26
Q

four factors that determine the amount of income tax to be withheld from an employee’s gross pay each pay period

A

total earnings
marital status
number of withholding allowances claimed
length of the pay period

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27
Q

exempts a specific dollar amount of an employee’s gross pay from federal income tax withholding

A

withholding allowance

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28
Q

a method of determining the amount to withhold from an employee’s gross pay for a specific time period.

A

wage bracket method

29
Q

FICA taxes include amounts for what

A

Social Security

Medicare program

30
Q

what is the rate for Social Security deductions

A

6.2% on maximum earnings of $117,000

31
Q

what is the rate for Medicare deductions

A

1.45%; there is no maximum

32
Q

payroll records should include the following information for each employee

A
  1. name, address, occupation, SSN, marital status, and number of withholding allowances
  2. gross amount of earnings, date of payment, and period covered by each payroll
  3. gross amount of earnings accumulated for the year
  4. amounts of taxes and other items
33
Q

three types of payroll records are used to accumulate the payroll records

A
  1. payroll register
  2. payroll check (or record of direct deposit) with earnings statement attached
  3. employee earnings record
34
Q

a form used to assemble the data required at the end of each payroll period

A

payroll register

35
Q

a separate record of each employee’s earnings

A

employee earnings record

36
Q

wages and salaries expense is (credited/debited) for the gross pay of all employees for each pay period.

A

debited

37
Q

federal income tax payable is (credited/debited) for employee’s earning

A

credited

38
Q

the federal income tax payable is (credited/debited) when it is paid to the IRS

A

debited

39
Q

Medicare and Social Security taxes payable are (debited/credited) when they are withheld from employee’s wages

A

credited

40
Q

Medicare and Social Security taxes payable are (debited/credited) when they are paid the appropriate entity

A

debited

41
Q

In addition to the gross pay for each employee, the employer must pay payroll taxes, which include

A

Federal income tax
FICA (Social Security/Medicare)
FUTA
SUTA

42
Q

most employers must pay

A

Federal income tax
FICA (Social Security/Medicare)
FUTA
SUTA

43
Q

Both the employee and employer pay an equal share of this

A

FICA taxes

44
Q

Given to each employee by January 31

Shows the total amount of wages paid and taxes withheld during the preceding taxable year

Prepared from the employee earnings record

A

Wage and Tax Statement W-2

45
Q

Sent by employers with Copy A of Forms W-2 to the Social Security Administration

Due by February 28 following the end of each taxable year

Summarizes employee earnings and tax information presented on Forms W-2 for the year

A

Transmittal of Wage and Tax Statement

46
Q

Worker’s compensation insurance

A

Provides insurance for employees who suffer job-related illness or injury

Required by most states

The employer usually pays the entire cost

The rate depends on the:
Number of employees
riskiness of the job
company’s accident history. (The state of Texas does NOT mandate this)
The employer usually pays the premium at the beginning of the year, based on the estimated payroll for the year

The year-end adjustment is made when the actual payroll is known

47
Q

a written promise to pay a specific sum at a definite future date. Also called a note. Often used when credit is extended for 60 days or more, or when large amounts of money.

A

Promissory note

48
Q

The months or days from the date of issue of a note

A

date of maturity

49
Q

what is the formula for calculating interest

A

principal x rate x time

50
Q

a process in which ratios computed from accounting data are compared and analyzed to develop insights about a company’s risks and performance. Useful when you want to compare your business to other similar businesses. Lenders will use ratios when you go to borrow money

A

ratio analysis

51
Q

what is the formula for current ratio

A

current assets
______________
current liabilities

52
Q

what is the formula for current ratio

A

current assets/ current liabilities

53
Q

what is the rule of thumb for current ratio

A

2 to 1

54
Q

measures the ability of the company to pay current liabilities. Shows how well a company can meet its obligations without having to liquidate or depend too heavily on its inventory.

A

Acid-test/Quick ratio

55
Q

formula for acid test ratio

A

quick assets
_________
current liabilities

56
Q

formula for acid test ratio

A

quick assets/current liabilities

57
Q

what is the ratio for acid test

A

1 to 1

58
Q

what is the formula for A/R turnover

A

sales
_____
avg. A/R balance

59
Q

what is the formula for A/R turnover

A

sales/avg. A/R balance

60
Q

average time to collect receivables

A

age of A/R

61
Q

what is the formula for age of A/R

A

365
_____
AR turnover

62
Q

measures how many times a company’s inventory has been sold during the year

A

inventory turnover

63
Q

what is the formula for inventory turnover

A

cost of goods sold
______________
avg inventory balance

64
Q

days taken to sale inventory

A

Age of inventory

65
Q

measures how much out of every dollar of sales a company keeps in earnings

A

Profit margin

66
Q

what is the formula for profit margin

A

net income
_________
net sales

67
Q

represents the % of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold by a company

A

gross profit percentage

68
Q

what is the formula for gross profit percentage

A

Net sales – cost of goods sold
_______________
Net sales

69
Q

acid test-ratio also called

A

quick ratio

Nervous Nellies (12 decks)

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