Deck 14: Understanding Financial Documents

Question 1

A goal of businesses is to make more money than is spent in operating the business.

Answer 1

True

Question 2

A cash flow statement is a financial document that:

A) shows incoming and outgoing cash for a given period.
B) shows the income, expenses, and profit or loss of an organization for a given period of time.
C) is typically created once each fiscal year.
D) Both B and C

Answer 2

A

Question 3

Some companies use company credit cards that eliminate the need for most petty cash transactions.

Answer 3

True

Question 4

Owner's equity is the financial claims to the assets of the organization by the owner after all debts have been paid.

Question 5

A voucher is a bill from a vendor requesting payment for the items ordered.

Question 6

A plan that includes projected income and expenses for a business for a given time period is a(n) :

A) balance sheet.
B) income statement.
C) cash flow statement.
D) budget.

Question 7

The profit or loss amount from the income statement is also shown on the organization's cash flow statement.

Question 8

Budgets affect managers at all levels of the company, but they typically do not affect other employees.

Question 9

Profits of the business that have not been paid to shareholders are called:

A) dividends.
B) losses.
C) retained earnings.
D) discounts.

Question 10

Tax rates for Social Security apply to all earnings a person has each year.

Question 11

Federal income taxes are sometimes called FICA taxes because they are collected under the authority of the Federal Insurance Contributions Act (FICA) .

Question 12

A payroll service is a company that handles payments to employees, taxes, and related functions for other businesses.

Question 13

A financial document that shows the assets, liabilities, and owner's equity of an organization on a given date is a(n) :

A) balance sheet.
B) income statement.
C) cash flow statement.
D) budget.

Question 14

Federal income tax is a mandatory payroll deduction under federal law.

Question 15

The process of comparing and checking company records against those shown on a bank statement to determine whether the records are in agreement is called a bank reconciliation.

Question 16

Most state governments do not have mandatory state income taxes.

Question 17

Most businesses can continue to operate indefinitely even if they do not make a profit.

Question 18

A financial document that shows the income, expenses, and profit or loss of an organization for a given period of time is a(n) :

A) budget.
B) income statement.
C) cash flow statement.
D) balance sheet.

Question 19

A credit card reader can be used with many smartphones and tablets, making it possible to accept credit card payments wherever there is cell phone service.

Question 20

Using a spreadsheet program is an efficient way to complete a bank reconciliation.

Question 22

A health savings plan:

A) may be an elected payroll deduction for an employee.
B) allows users to save money that is deducted after taxes to pay for future medical expenses.
C) provides benefits that are not taxed as long as the money is used for medical expenses.
D) Both A and C

Question 23

The earnings, deductions, and net pay for employees are shown on a(n) :

A) employee's W-2 form.
B) payroll register.
C) cash flow statement.
D) Both A and B

Question 24

To verify that the items received are the items you ordered, compare the packing slip and items received with the:

A) invoice.
B) purchase order.
C) purchase requisition.
D) receiving report.

Question 25

When completing a bank reconciliation:

A) enter the check register balance on the current date.
B) add bank fees to the check register amount.
C) subtract outstanding deposits from the bank statement balance.
D) Both B and C

Question 26

A document that shows items requested and an approval to purchase the items is a(n) :

A) invoice.
B) purchase order.
C) purchase requisition.
D) receiving report.

Question 27

Deductions may be made from an employee's pay for which of the following?

A) Income tax
B) Social Security tax
C) Medicare tax
D) All the above

Question 28

Federal income taxes are withheld from an employee's pay on the basis of information given on a(n) :

A) Form I-9.
B) Form W-2.
C) Form W-4.
D) Both B and C

Question 29

The terms on an invoice are 1/10, net 30. The amount is paid within two days of receiving the invoice. The total before the discount is $250. What is the discount amount?

A) $1.50
B) $2.50
C) $7.50
D) $25.50

Question 30

The federal government's health insurance program for people age 65 or older is called:

A) Social Security.
B) FICA.
C) Medicare.
D) The Affordable Care Act Insurance Program.

Question 31

An employee worked 40 hours at $12 per hour and 5 overtime hours at 1.5 times regular pay. Federal income taxes were deducted from the employee's pay at a rate of 20 percent. Social Security and Medicare taxes were deducted at a combined rate of 7.65 percent. What was the employee's net pay?

A) $412.40
B) $480.00
C) $570.25
D) $600.50