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Accounting Law > Test 1 > Flashcards

Test 1 Flashcards

1
Q

How is a principal – agent relationship created?

A

-Employment – employee = agent; employer = principal

  • Power of Attorney
    • formal written document given by the P to the Agent to act for him
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2
Q

What are the 2(4) types of power of attorney?

A
  • General Power of Attorney – Agent is authorized to do everything P could legally do while P could legally do it himself
  • Special P of A – A is authorized to do ONLY specified thing(s) for the P but only whie the principal could legally do it himself
  • Durable – can be General or Special – Agent can continue to act for the P even when the P could not legally act for himself
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3
Q

What are the duties of the P to A and A to P

A

**Fiduciary Duty- utmost loyalty, trust and good faith in dealings between P and A

Duties of P to A – follow the rules – example MLB players agreement drug testing/replays – be true to your word

Duties of A to P -LORD

- loyalt
- obedience
- reasonable care
- Duty to account for money
- duty to notify regarding changed circumstances
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4
Q

How can a power of attorney be terminated

A

By Acts of Parties

  • completion
  • revocation (taken away/new form)
  • quit
  • time period

By operation of Law

  • incapacity (not for durable doe)
  • death (ends even if durable)
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5
Q

Can A contractually obligate the principal? If so how so?

A

Yes if Agent had the AUTHORITY to enter into the K

2 types of Authority

  • Actual - relationship between P and A, A acts under P’s Authority
    - (actual) Express - clear unequivocal authorization
    - (actual) Implied - everything Reasonably and customarily necessary Ex: company car empty - agent puts gas
  • Apparent - relationship between Agent and 3rd parties (others)
    - P is contractually bound if 3rd party could believe Reasonably Agent was authorized to act for P - even if they were not (purchase order for company)
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6
Q

What is ratification?

A

Even if P didn’t authorize A to act, P still bound if P ratifies A’s actions (doesn’t stop it but hears it)

Ex: mgr hears A tell customers there is a false discount, doesn’t do anything about it

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7
Q

If A receives a notice is P responsible for notice too?

A

Yes if A’s receipt of notice is within A’s actual or apparent authority

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8
Q

Is A K’ally personally liable to 3rd party?

A

Disclosed principal - 3rd party should have reasonably known that A is just P’s A.
=no personal liability

Undisclosed - 3rd party reasonably shouldn’t have known that A is P’s A. Then A is liable for broken k.

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9
Q

What is not law? (describe them)

A

Theology - relationship with god

Morality - accepted societal standard of conduct

Ethics - established personal standard of conduct

All these LIFT humanity to higher plan of existence (roof of house)

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10
Q

What is Law?

A

Minimum code of conduct so as to maintain order in the society and separate civilized man from anarchy (no law).

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11
Q

What are the 3 Sources of Law?

A

JAW (real order wja)

Judge made (common law)

Administrative

Written

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12
Q

What are the types of Written Law?

A

written down somewhere

  • constitutions - basic contract between the people and their government
  • treaties - contracts between two countries
  • statutes - laws passed by elected bodies - congress; texas legislature, etc.
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13
Q

What are Judge Made Laws?

A

Common Law = precedent - find prior decision = stare decisis - “let the decision stand”

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14
Q

What is administrative Law?

A

Governmental Agencies - IRS Revenue Rulings - interpretations of IRS code; ex: tax due in mail by april 15th

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15
Q

What are the three categories of Law?

A

Criminal

Public

Civil

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16
Q

What is criminal law?

A

government (state) vs one (individual)

punishment = fine, jail time, etc

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17
Q

What is public law?

A

Government and all the people
- good for everyone
-public good
Ex: constitutions and treaties

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18
Q

What is civil law?

A

Individual vs company OR vs Individual

-about money

contracts - legally enforceable promises

property - land or personal property

**torts - personal injuries And OR property damages

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19
Q

When is the Employer (P) liable for torts committed by an employee (A)?

A

If the tort was within the scope of the employee’s employment

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20
Q

What is Vicarious Liability (respondent superior) ?

A

P is not liable for what P did but because P’s A did something for which P is held responsible

21
Q

What are ethics?

A

Principles of conduct governing an individual or a group - study of human character

22
Q

What is egoism?

A

Promotion of individual pleasure via material things or career success

epicureanism - eat drink and be merry for tomorrow you die; don’t care about anyone else

what do you want to come after your comma

23
Q

What is Utilitarianism?

A

option that best maximizes pleasure and minimizes pain for the majority of the people

majority wins

good for the greatest number; WWII; fair play

24
Q

What is deontological reasoning?

A

all questions about nature and mankind can be answered scientifically

-science good at explaining “how”

philosophy/spirituality - good at explaining “why”

25
Q

Situational Ethic

A

no principle or value is right or or wrong - everything is Relative

only fitting or not fitting - no right or wrong

hiding under the table and telling Nazis they were under the table; Nazis didn’t look

26
Q

What is Alternative Ethic System?

A

Integrity - AICPA code of conduct = sacrifice of personal advantage

respect - reciprocal rights and duties of those living in certain communities

 - negative injunctions (thou shalt not)
 - affirmative duties (do good for those who deserve it

Selfless Service - Anything worthwhile will cost you something;

    - empathy - feelings for another
    - empathy with legs

3 legged stool - multiple viewpoints

27
Q

Why we need ethics in the market place?

A

Our lives depend on ethics of strangers and most of us are always strangers to other people

28
Q

Legal Test for test of employee or ind k?

A
  • Amount and kind of CONTROL exercised
  • employee - if boss “P” controls both METHOD (how) and END RESULT (what)

Independent - if boss controls END RESULT but NOT METHOD of performance (how)

29
Q

Query 1?

A

Employer-employee or independent K

30
Q

Query 2-What is the scope of employment?

A

Work EXPRESSLY directed to be performed (take this to the bank)

Work reasonably incidental to work expressly directed (getting gas on the way to the bank)

Deviations - use of company car and accident

 - Was there a deviation at all?
 - What was the degree of the deviation (how far away did you drive to go get donuts)
 - Was it reasonably foreseeable by boss (did he except you to go get donuts too)
- Boss must prove not within scope
31
Q

Are you within the scope while commuting?

A

Texas - GR: person is NOT wi scope while commuting to and from work

other facts that can change outcome(expand scope):

  • cell phone usage - biz =w/i scope
  • texting
  • checking emails
32
Q

Employee Test - 20 characteristcs (first half)

A

Instructions - required to comply with other person’s instructions about when where and how or she is to work = employee

Training - requiring worker to attend meetings and training = employee

Integration

-Set Hours of Work - establishment of set hours of work by the person for whom the services are performed indicates CONTROL = employee

Full Time Required=substantial full time - employee

Doing Work on Employer’s Premises (or client) - done off premises = freedom of control = individual

Order sequence set - must perform services in order set by employer

33
Q

Employee Test - 20 characteristics (continued)

A

Oral or Written Reports - worker must submit regular written reports to employer = employee

Payment by the hour,week or month = employee; payment made by the job or straight commission = individual contractor

Payment of Busness and Travel Expenses = employee

Furnish of Tools and Materials = person for whom the services are performed furnish significant tools and materials for worker= employee

Signifcant Investment - worker invests in facilities that are used by the worker - independent

Realization of Profit or Loss - worker than can realize a profit or suffer a loss as a result of the worker’s services = independent

Working for more than one firm = multiple unrelated projects - independent

Making Service Available to General public on a consistent basis = independent contractor

Right to Dischare - employer exercises control through the threat of dismal and the worker must obey the employer’s instructions = employee (independent cannot be fired as long as he produces the result that meets the contract specifications)

Right to Terminate - if worker has the right to end his or her relationship WITHOUT INCURRING LIABILITY = employee

34
Q

Partnership Definition (6 words)

A 
Voluntary
Association
Two or more persons(companies)
Engaged in 1 or more businesses
As co-owners
For a profit

VATEAF

35
Q

Difference between Joint Venture and Pr

A

JV - only do 1 Business - Kingwood

36
Q

What is a Pr Agreement? What is included

A

Written document creating Pr

Inside

  • Name
  • Term
  • Financial Arrangements
  • Management
  • Dissolution - Exit Strategy
37
Q

Tenants in a PR - privileges

A

each pr owns an undivided % interest in Pr which gives them privileges such as:

Mgmt rights - right to participate in mgmt decisions UNLESS Mg pr chosen to handle daily operations

Profits, losses, and other distributions

  • right to share equally in Pr’s profits UNLESS Pr Agreement states the contrary and losses in the same % of profits
  • right to share in Pr property upon dissolution
38
Q

Duties of prs

A

FIDUCIARY DUTE = loyalty - and can’t compete against Pr

39
Q

A:P :: pr:Pr

A

Agency rules apply

40
Q

Pr creditors

A

Look first to Pr assets and then individuals (UNLIMITED LIABILITY)

Can creditor become a new pr?
-not unless permitted in K

41
Q

Assignability

A

Unless Pr Agreement states otherwise - pr can assign his rights to receive profits and property from Pr to 3rd part but NOT right to make Pr decisions

CRITICAL IMPORTANCE OF

1) Pr Agreement
2) tenants in Pr
3) Pr as voluntary association

42
Q

2 step process of Prship Termination

A

Dissolution - “snap shot” - point in time when Pr states to discontinue “pivot point”

Winding up - “moving picture” - on-going process of ending the PR

43
Q

Causes of dissolution (Pivot, snap shot)

A

1) Acts of the pr’s
- Agreement
- Withdrawl
- New pr = new entity now

2)Operation of Law
-Death
-Bankruptcy (pr or Pr)
Illegality (not a lawyer anymore)

3) Court Dissolution
- Incapcity(brain dead)
- Business impracticability
- Misconduct (pr won’t resign)
- Deadlock (always 50/50 on decisions - can’t make one)

44
Q

What is the winding up procedure?

A

Moving Picture - ongoing process of ending Pr

1) selection of liquidating pr
2) collect money owed to Pr by others
3) liquidation (turning Pr property into $)
4) pay outstanding bills
5) distribute remaining asset’s to prs (just like profits - same % UNLESS Pr Agreement states otherwise)

45
Q

Partnership Liabilities

A

Pr primarily responsible for Pr liabilities BUT pr’s have individual secondary liability UNLIMITED = biggest problem with regular Prships

46
Q

Ways to avoid Pr dissolution = Continuation

A

1) Buy-Sell Agreement or in Pr Agreement itself - Pr can continue after dissolution event (death etc) by purchasing deceased pr’s interest if mandatory or optional buy-sell
2) Value “negotiated in good faith” OR whatever Pr Agreement definties it as “book value” - usually buy life insurance for pr’s for this

47
Q

What is a Limited Pr?

A

1 or more general pr(s) = Unlimited Liability

1 or more limited pr(s) = limited liability

48
Q

Advantages/disadvantages over regular Pr?

A

1) limited liability for limited pr’s
2) flexibility of financing
3) no double taxation - not a corporation

disadvatnages

1) lack of direct control by ltd prs
2) sale of limited Prship interests are SECURITIES so compliance with federal securities laws necessary

49
Q

What is a general partner?

A

Management duties -General Mgmt pr

  • Unlimited liability UNLESS Gen pr = corporation or LLC
  • ordinary matters = handled by mgmt gen pr BUT extraordinary matters(dissolution etc) require vote of ALL general and limited partners

Accounting Law (1 decks)

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