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2009 DECA Ontario Provincials Competition ACTTest 993 ACCOUNTING APPLICATIONS 1

1. Which of the following is an example of a reason for dismissing an employee that might be consideredillegal:

A. Employee's specialized job no longer exists. C. Employee develops a physical disability.B. Employee is a consultant. D. Employee is a temporary worker.

2. The American Red Cross is an example of a(n) ___________ corporation.A. public C. "S"

B. hybrid D. nonprofit

3. A group's physical and social characteristics (such as interests, ages, political views, incomes, and ethnicbackgrounds) are called

A. statistics. C. nationalities.B. profiles. D. demographics.

4. A supervisor has given instructions for performing a complex new skill and demonstrated the skill for anemployee. What should be the next step?

A. Let the employee practice the new skillB. Ask the employee to teach the skill to othersC. Assume the employee can now perform the new skillD. Test the employee's ability to perform the new skill

5. Accounting managers who conduct staff meetings often assign one of their employees to takeA. minutes. C. requests.B. messages. D. questions.

6. Learning a client's name and using it when greeting the client is a technique that promotes positive__________ relations.

A. management C. employerB. customer D. employee

7. Interpreting business policies to clients is usually easier if the accounting firm has created a____________ atmosphere.

A. friendly C. remote

B. distant D. superior

8. Which of the following statements is true:A. As human resources become limited, natural resources and capital goods become limited.B. As capital goods and human resources become limited, natural resources become limited.C. As natural and human resources become limited, capital goods become limited.D. As capital goods and natural resources become limited, human resources become limited.

9. Usefulness created when the ownership of a product is transferred from the seller to the buyer defines__________ utility.

A. possession C. placeB. time D. form

10. The connection between the social responsibility of an accounting firm and the community in which theaccounting firm operates is that the accounting firm's social responsibility __________ the community.

A. depends upon C. has an effect onB. targets only D. targets the area outside

11. What effect does competition have on the marketplace?A. Increased profits for businesses C. Improved goods and servicesB. Higher prices for goods and services D. Decreased services provided to consumers

Students Demonstrating Excellence Celebrating Achievement since 1979

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2009 DECA Ontario Provincials Competition ACTTest 993 ACCOUNTING APPLICATIONS 212. One of the positive effects that government regulation has on business is that many of the laws are

intended to __________ business.A. protect C. defendB. restrict D. conserve

13. Why is the productivity of service businesses measured differently than that of manufacturingbusinesses?

A. Manufacturers measure their productivity on a regular basis.B. Service businesses are less efficient than manufacturers.C. Service businesses are concerned about the appropriateness of their products.D. Manufacturers produce intangible goods.

14. Calculate the rate of unemployment if there are 170 million people in the labor force and 8.5 millionpeople are unemployed.

A. 5% C. 6%B. 4.5% D. 5.5%

15. Which of the following characteristics is a secondary dimension of diversity:A. Geographic location C. EthnicityB. Race D. Gender

16. Which stage of negotiation do many people consider the most important part of the process:A. Mediation C. AssessmentB. Concession D. Preparation

17. Which of the following is not one of the steps of the informal process of reaching a consensus:A. Create a list of alternatives. C. Discuss why everyone should agree.B. Write down your ideas. D. Revise your idea list.

18. You're starting an accounting firm in your town. Which of the following should you do to determine thenecessary resources for your vision:

A. Determine how much money you'll need for at least the next 20 years.B. Determine only how much money you'll need next year.

C. Determine how much money you have and how much you will need.D. Determine only how much money you already have.

19. Carmen had an accuracy rating of 91 percent last year. This year, she won't be satisfied unless heraccuracy rating is at least 92 percent or higher. Which behavior of an achievement-oriented person doesthis illustrate?

A. Not being satisfied with current performance C. Demonstrating leadershipB. Taking moderate risks D. Desiring feedback

20. Which of the following is a true statement about change:A. All changes are good. C. Change comes in only one form.B. Change can be avoided. D. Everyone reacts differently to change.

21. Workers who must rely on each other in order to carry out their jobs would be described as __________workers.

A. ineffective C. interdependentB. self-sufficient D. efficient

22. The arrangement by which businesses or individuals can purchase now and pay later is known asA. capacity. C. interest.B. credit. D. collateral.


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2009 DECA Ontario Provincials Competition ACTTest 993 ACCOUNTING APPLICATIONS 323. Of the following ownership investments, which involves owning items that gain or lose value over time:

A. Collectibles C. Real estateB. Stock mutual funds D. Stocks

24. Which of the following would a business use in order to know how much money is available to hire morestaff:

A. Income statement C. Accounting information

B. Profit-and-loss statement D. Journal

25. What is a business's ending cash balance for the month if it has total cash receipts of $41,250, total cashpaid out of $28,500, and assets worth $15,700?

A. $12,750 C. $25,500B. $12,800 D. $25,550

26. Which of the following is an internal procedure that many businesses use to control cash:A. Give receipts to all customers C. Track dividends paid to ownersB. Monitor intangible assets D. Evaluate projected budgets

27. One way for a business to track the transaction when a customer returns an item is to prepare a(n)A. credit memorandum. C. expenditure report.

B. uncollectible record. D. liability document.

28. When processing accounts payable checks, businesses factor in the invoice terms in order to calculatethe

A. amount to pay. C. sales tax.B. rate of interest. D. gross profit.

29. Some businesses prepare an accounts payable schedule based on availableA. tax deductions. C. discount terms.B. interest rates. D. credit balances.

30. What do businesses often indicate on invoices when preparing customer statements?A. Sales discounts C. Credit policies

B. Ordering information D. Loan principal

31. Calculate the amount a business should deduct from sales revenue based on the following information:total sales of $375,000, sales returns that equal 6% of sales; and allowances of $2,300:

A. $21,050 C. $24,800B. $22,500 D. $23,750

32. Hours worked, payroll dates, and type and amount of deductions are examples of information thatbusinesses usually maintain in __________ records.

A. accounts payable C. total liabilitiesB. employee earnings D. cash disbursement

33. Comparing budgeted and actual amounts can be used to evaluateA. the level of competition. C. most aspects of a business.B. employee performance. D. the accounting department.

34. Last year, a business had sales of $63,500. A downturn in the economy is expected to reduce sales by15% this year. Forecast sales for this year based on this prediction.

A. $73,025 C. $63,500B. $9,525 D. $53,975


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2009 DECA Ontario Provincials Competition ACTTest 993 ACCOUNTING APPLICATIONS 435. One of the main reasons for maintaining accounting systems is to

A. monitor profit. C. buy equipment.B. pay employees. D. analyze budgets.

36. What is the base figure for calculating the amount of sales tax a business owes to the state if it had grosssales of $549,210 and exempt sales of $29,925?

A. $549,210 C. $564,172

B. $519,285 D. $579,135

37. What does a business consider when applying the basic accounting equation to business transactions?A. Liabilities C. Cash flowB. Receivables D. Net profit

38. One reason businesses develop a chart of accounts is to reduce the possibility ofA. crediting payment to the wrong customer. C. overpaying the utility expense.B. making errors in recording financial data. D. depreciating new equipment.

39. Which of the following examples provides the greatest cash flow for a business:A. Customer buys goods for $30,000 and pays in 120 days.B. Customer buys goods for $25,000 and pays in 90 days.

C. Customer buys goods for $10,000 and pays in 60 days.D. Customer buys goods for $5,000 and pays in 15 days.

40. Why is it important for businesses to analyze daily transactions?A. To determine liquidity C. To verify tax dataB. To calculate payroll D. To monitor profitability

41. Why is it important for businesses to periodically evaluate cash-handling techniques?A. To count change funds C. To reconcile depositsB. To audit payments D. To prevent shortages

42. What do businesses need to monitor to control their accounts payable?A. Type of raw materials C. Amount of credit to extend

B. Value of assets D. Availability of cash

43. What do businesses often use to track and calculate the expense involved in producing products?A. Costing procedures C. Ordering techniquesB. Purchasing policies D. Selling methods

44. Which of the following expenses do businesses consider when implementing costing procedures:A. Net profit and loss C. Interest rates and dividendsB. Direct and indirect labor D. Sales returns and allowances

45. Why is it important for a business to age accounts receivable?A. To organize accounting information C. To determine cost of goods soldB. To analyze unpaid balances D. To prepare operational reports

46. What do businesses need to control in order to have cash available to pay expenses and continue tooperate?

A. Accounts receivable C. Sales trendsB. Net worth D. Economic conditions

47. One reason businesses evaluate their ability to collect receivables that are many months past due andthat they are having difficulty collecting is to decide how to

A. depreciate old assets. C. report the earned interest.B. calculate late penalties. D. account for the bad debt.


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2009 DECA Ontario Provincials Competition ACTTest 993 ACCOUNTING APPLICATIONS 548. When processing payroll time cards, which of the following is usually considered time for which

employees must be compensated?A. Going to voluntary training C. Working at homeB. Driving to work D. Being on call

49. Calculate the base pay of a part-time employee who works five hours a day and is paid $13.50 an hour ifthe employee misses one day of work during the two-week pay period.

A. $607.50 C. $621.25B. $675.00 D. $648.75

50. Part of the process of allocating payroll costs involves adding the payroll amount to the __________category.

A. assets C. expensesB. accounts payable D. available cash

51. Why is it important for a business's accounting department to verify the receipt of new inventory?A. To process accounts receivable C. To calculate current valueB. To regulate cash flow D. To analyze the transaction

52. Why do businesses calculate the depreciation of assets?

A. To evaluate accounts receivable C. To determine an operating expenseB. To decide when to buy new equipment D. To set up an inventory procedure

53. In which of the following situations is a business using the accelerated depreciation method to report thevalue of assets on financial statements:

A. Depreciates an asset by the same amount each year for the life of an assetB. Depreciates assets higher the first year and less in subsequent yearsC. Depreciates assets according to the purchase priceD. Depreciates an asset so that it has no value after the first year

54. A business sells a product for $750 and offers a customer cash discount terms of 3/15, n/30. If thecustomer pays within 15 days, what amount will the business report on its income statement?

A. $727.50 C. $712.50

B. $637.50 D. $675.50

55. Why is it important for a business to manage its cash balance?A. To make investments C. To prevent lossB. To earn interest D. To chart sales

56. Why would a business in Country A buy products from a business in Country B and arrange to pay forthe products in the currency of Country A?

A. To simplify the procedure C. To take advantage of a discountB. To prevent an exchange loss D. To increase the payment time

57. To increase their liquidity, businesses often decide to keep an amount of emergency cash inA. mutual funds. C. savings accounts.B. certificates of deposit. D. government bonds.

58. If the Canadian dollar is worth $.90 in the U.S., calculate the value of 250 Canadian dollars in U.S.dollars.

A. $225 C. $275B. $250 D. $200

59. The budgeting process a business follows usually depends on the business'sA. purchasing process. C. operating cycle.B. payroll system. D. delivery schedule.


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2009 DECA Ontario Provincials Competition ACTTest 993 ACCOUNTING APPLICATIONS 660. What do businesses consider when preparing a sales budget?

A. Maintenance costs C. Operating expensesB. Inventory levels D. Economic conditions

61. Which of the following is an example of a variable expense that businesses estimate when preparing aselling expenses budget:

A. Commission C. Utilities

B. Purchases D. Depreciation

62. By evaluating a projected income statement, a business will be able to determine ifA. cash is available to cover expenses. C. its assets are more than its liabilities.B. it is earning the desired level of profit. D. the owner's equity is increasing.

63. During the process of evaluating a projected balance statement, businesses often compare the balancestatements with

A. future credit options. C. last year's results.B. investment opportunities. D. capital expenditures.

64. By comparing the master budget to the business's actual performance, a business can determine if it isA. following the standards of the industry. C. achieving the desired level of profit.

B. paying invoices before the due date. D. buying products from the lowest bidder.

65. One reason businesses evaluate long-term liabilities is to calculateA. payroll tax. C. actual cost.B. cash flow. D. net profit.

66. Why is it important for businesses to account for differences between actual and estimated expense?A. To review sales returns C. To make future decisionsB. To plan collection procedures D. To generate source documents

67. What method of accounting for investments in other companies does a business use if it owns more than50% of the common stock of another business?

A. Equity C. Market value

B. Consolidation D. External

68. When verifying payroll information, Michael should make sure that an hourly employee is compensatedfor

A. local taxes. C. insurance.B. union dues. D. overtime.

69. How often are businesses required to prepare payroll tax reports and send tax payments to thegovernment?

A. Monthly C. YearlyB. Quarterly D. Semi-annually

70. One reason businesses value and report intangible assets on financial statements is because theseassets have

A. residual expenses. C. short lives.B. economic benefits. D. maintenance costs.

71. Which of the following is a reason why many businesses process voucher forms:A. To control operating costs C. To make requests of vendorsB. To pay purchase orders D. To reimburse employees


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2009 DECA Ontario Provincials Competition ACTTest 993 ACCOUNTING APPLICATIONS 772. If a business declares a $ .25 per-share dividend on 825,500 common shares, calculate the total amount

of cash dividends the business owes investors.A. $205,125 C. $206,375B. $206,250 D. $205,400

73. A business that buys a product for $15 and reports the inventory value of that product as $15 on financialstatements is using the __________ concept of reporting inventory.

A. estimated profit C. historical costB. market value D. sales expense

74. The main purpose of an exit interview is toA. determine the employee's attitudes and feelings about the company.B. convince the employee not to leave.C. determine the employee's wage at the time of termination.D. prevent legal action.

75. Which of the following is a benefit to businesses of orienting new employees:A. Provides information C. Reduces turnoverB. Increases profit D. Eliminates training

76. Which of the following is a form of harassment on the job:A. Mentoring C. PromotingB. Teasing D. Evaluating

77. Which of the following is an appropriate action for a manager to take in documenting the solution to anemployee complaint:

A. Discard the file when the complaint has been resolvedB. Write a lengthy, detailed report of the solutionC. Cover all of the critical aspects of the complaintD. Delegate the documentation of the solution to an employee

78. When an employee is paid a percentage of his/her sales, this is calledA. piece rate. C. salary.

B. commission. D. time wage.

79. The overall objective of the marketing process is the coordination of theA. pricing and promotion of goods and services.B. production and consumption of goods and services.C. supply chain and retail outlets.D. merchandise inventory and advertising plans.

80. When Roger retrieved a client's information and dialed the phone number listed, he discovered theinformation was incorrect. This is an example of the importance of __________ records.

A. required C. digitalB. archived D. quality

81. Computer technology makes it possible for businesses to monitor the payroll accounting process andquickly identify any

A. deductions. C. calculations.B. irregularities. D. allowances.

82. One important way that accounting information is used in business is to prepareA. inventory controls. C. financial reports.B. operating procedures. D. pricing systems.


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2009 DECA Ontario Provincials Competition ACTTest 993 ACCOUNTING APPLICATIONS 883. Accounting firms should help employees to prevent accidents and injuries by providing

A. attractive furnishings. C. a safe work environment.B. a comfortable lounge area. D. a convenient lunch room.

84. Who is usually responsible for planning a project?A. Project scheduler C. Project assistantB. Project manager D. Project coordinator

85. The buying of goods and services for a business is known asA. negotiating. C. transformation.B. selling. D. purchasing.

86. The primary reason that Porter and Barnes, a small accounting firm, monitors its supply of paper, pens,and staples is to make sure that it

A. has enough stock on hand to sell to its clients.B. does not have to pay for unnecessary storage costs.C. obtains deep, bulk discounts for the items and gets free shipping.D. has enough items on hand to run the business smoothly.

87. A crucial part of creating a quality culture in an accounting firm involves encouraging all employees to

A. find ways to improve. C. compete for attention.B. give up their authority. D. work without supervision.

88. Three part-time employees are paid $11.50 per hour to work five hours a day, five days a week. If theyregularly come in 15 minutes late and leave 15 minutes early, calculate the amount the business is losingin payroll expense each week.

A. $64.50 C. $75.75B. $86.25 D. $57.50

89. A primary reason that a business conducts a break-even analysis is forA. determining strengths. C. evaluating weaknesses.B. planning profits. D. calculating taxes.

90. How does borrowing money to purchase a facility often result in a tax savings for a business?A. Ownership improves a business's credit rating.B. Interest paid on a mortgage is tax deductible.C. Mortgages require a substantial security deposit.D. Maintenance fees are part of the monthly payment.

91. Which of the following reflects a true relationship between decision making and problem solving:A. You need to solve a problem before making a decision.B. You need to make a decision before solving a problem.C. You don't make a decision when solving a problem.D. You don't have to have a problem to make a decision.

92. Job applicants often list on their rsums the names, positions, and addresses of several people who arewilling to serve as

A. colleagues. C. associates.B. companions. D. references.

93. The primary reason why many people engage in career-oriented networking activities is toA. cultivate a wide circle of social and personal contacts.B. develop an extensive list of sales prospects and contacts.C. obtain letters of recommendation from previous employers.D. connect with others who might help them accomplish professional goals.


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2009 DECA Ontario Provincials Competition ACTTest 993 ACCOUNTING APPLICATIONS 994. Which of the following is a reason why businesses calculate the break-even point:

A. To estimate income from sales C. To determine capital needsB. To predict fixed expenses D. To evaluate promotional costs

95. The original price of a product is $345 and a business discounts it by 15% to stimulate sales. Calculatethe total amount of the discount and allowance if the business sells the product to an employee who isentitled to a 20% discount.

A. $224.25 C. $120.75B. $234.60 D. $110.40

96. If investment costs are high but the turnover rate is low, a business might decide toA. eliminate personnel. C. add shelf space.B. increase inventory. D. drop a product.

97. How does the design of an accounting firm's brochures compare with that of the firm's web site?A. Brochures should use fancy, script-like type, while web sites should stick to plain, basic type.B. Clients won't spend much time reading either one, so the copy on both should be as short as

possible.C. Good design requires clean lines, readability, and plenty of white space, whether in a brochure or

on a web site.

D. Brochures allow the design to include as many photographs and illustrations as possible, whileweb sites usually only have room for one or two.

98. When Janine wants to know what others are willing to pay for a bond she owns, she looks at theA. bid price. C. coupon rate.B. bond rating. D. issuer.

99. Which of the following is the main purpose of management:A. To obtain the needed resources C. To accomplish the business's goalsB. To reach a specific level of productivity D. To create a pleasant working atmosphere

100. Germaine will discuss his company's seven services in which part of the business plan?A. Table of contents C. Executive summary

B. Company description D. Product(s) offered


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2009 DECA Ontario Provincials Competition ACTTest 993 ACCOUNTING APPLICATIONS

101. C

Employee develops a physical disability. A variety of personnel laws and regulations make it difficult forbusinesses to dismiss employees without a significant reason. These laws and regulations are intendedto protect employees from being terminated for no legitimate reason. For example, it is not necessarilylegal to dismiss an employee who develops a physical disability if the disability does not interfere with theemployee's ability to work. People with disabilities are able to perform many jobs and they may not bedismissed simply because they develop a physical disability. For example, a person who uses awheelchair is still able to perform many business functions. Consultants and temporary workers are notfull-time employees of the business and may be dismissed legally. If an employee's specialized job nolonger exists and there are no other comparable jobs available, it is legal for a business to dismiss theemployee.SOURCE: BL:007SOURCE: Dessler, G. (2000). Human resource management(8th ed.) [pp. 378-380]. Upper Saddle

River, NJ: Prentice Hall.

2. DNonprofit. A nonprofit corporation is a business structure that primarily operates to achieve a missionrather than to make a profit. Its income is used to cover operational expenses. A nonprofit can be exemptfrom paying some or all taxes. Educational, religious, charitable, or scientific organizations are oftenestablished under this form of ownership. Hybrid is a term that is used to describe a limited liability

corporation (LLC) or limited liability partnership (LLP) because it combines the advantageouscharacteristics of a corporation and a partnership. The Subchapter "S," or "S," corporation is a private,state-chartered corporation whose owners are taxed as individuals in a partnership, if they meet certainconditions. It is limited to 75 or fewer shareholders, has limited shareholder liability, and requires littlefinancial reporting. The public, or open, corporation usually sells millions of shares of stock to manystockholders. The public corporation must furnish information to the public and to prospective investorsabout its earnings, assets, and debts.SOURCE: BL:003SOURCE: BA LAP 7Own It Your Way

3. DDemographics. Demographics are a group's physical and social characteristics, such as interests, ages,political views, incomes, and backgrounds. A profile is similar, but applies at the individual level.

Nationality is one kind of demographic. Statistics are often used to report demographics, but are not thedemographics themselves.SOURCE: CO:025SOURCE: QS LAP 9Well Said!

4. ALet the employee practice the new skill. The employee should be given the opportunity to practice a newtask or skill before s/he is responsible for its successful completion. Testing should occur after theemployee has had the chance to practice the skill. A supervisor should always make sure employeesunderstand instructions and can perform a skill satisfactorily before asking them to teach others.SOURCE: CO:139SOURCE: Desimone, R., Werner, J., & Harris, D. (2002). Human resource development(3rd ed.)

[pp. 193-195]. Orlando, FL: Harcourt.

5. AMinutes. Minutes are the official record of the proceedings of a meeting and summarize the meeting'simportant points. Accounting managers who conduct staff meetings often assign an employee to takeminutes in order to have an accurate account of what was discussed and decided upon during themeeting. A copy of the minutes usually is provided to each employee who attended the meeting. Arequest involves asking for something. Messages are a type of communication. A question is asking forinformation.SOURCE: CO:140SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C.A. (2009). Marketing essentials (pp. 190-191).

Woodland Hills, CA: Glencoe/McGraw-Hill.


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Test 993 ACCOUNTING APPLICATIONSKEY 11

6. BCustomer. Recognizing customers and calling them by name makes them feel welcome and important tothe business. They appreciate the recognition and are likely to return to the business. Positivemanagement and employer and employee relations involve those in the work situation.SOURCE: CR:003SOURCE: Rokes, B. (2000). Customer service: Business 2000(pp. 52-53). Mason, OH: South-

Western.

7. AFriendly. Treating clients in a friendly manner will make them feel more comfortable. They will feel thatthe accounting firm has a personal interest in them and be more accepting of any explanation of policies.Distant, remote, and superior are terms that refer to an unfriendly and cold atmosphere that would makeclients feel uncomfortable.SOURCE: CR:007SOURCE: Rokes, B. (2000). Customer service: Business 2000(pp. 12-13). Mason, OH: South-

Western.

8. CAs natural and human resources become limited, capital goods become limited. Capital goods are itemsmanufactured or produced from natural and human resources. Natural resources rely on nature to beproduced, and human resources rely on the population. Capital goods will become limited if there is ashortage of people and materials to produce them. Natural resources do not rely on human resources.SOURCE: EC:003SOURCE: Sexton, R.L. (2003). Essentials of economics (pp. 36-37, 49-50, 229-230). Mason, OH:

South-Western.

9. APossession. This type of utility is added to products through selling, promotion, and purchasingarrangements. Form utility is usefulness created by altering or changing the form of the product to makeit more useful to the consumer. Time utility is usefulness created when products are made availablewhen they are needed or wanted by consumers. Place utility is usefulness created by making sure thatgoods or services are available at the place where they are needed or wanted by consumers.SOURCE: EC:004SOURCE: EC LAP 13Use It

10. CHas an effect on. The social responsibility of the accounting firm affects many aspects of community lifeby affecting the level of employment, supporting cultural activities and educational programs, and makingdonations to worthy community causes. The local community is not the only target for the accountingfirm's social responsibility, but it is an important one. An accounting firm's social responsibility dependsupon the firm, not the community.SOURCE: EC:070SOURCE: EC LAP 20Business Connections (Business and Society)

11. CImproved goods and services. Competition in the marketplace leads to the production of higher qualitygoods and services. When businesses compete for customers, they try to keep their prices in line withcompetitors' prices. Services provided to consumers may be increased by competition due to businesses'vying for consumer dollars. Competition in the marketplace does not assure an increase in profit.SOURCE: EC:012SOURCE: EC LAP 8Ready, Set, Compete!


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12. AProtect. Government regulation has a positive effect on businesses by protecting them from unfaircompetitive practices of other businesses. Regulations about the use of resources gives all businessesfair access to those resources. Also, a business's patents, trademarks, or copyrights provide legalprotection for a company's products. The purpose of government regulation is not to restrict business,although some laws may limit what businesses are permitted to do. Businesses are expected to operatewithout government intervention designed specifically to conserve or defend them.SOURCE: EC:008SOURCE: EC LAP 16Regulate and Protect (Government and Business)

13. CService businesses are concerned about the appropriateness of their products. To measure theproductivity of a service business, the quantity, quality, appropriateness, and timeliness of the servicemust be considered. Service businesses can be as efficient as manufacturers. Both service businessesand manufacturers may measure their productivity on a regular basis. Manufacturers produce tangiblegoods, while service businesses produce intangible outputs.SOURCE: EC:013SOURCE: EC LAP 18Make the Most of It (Productivity)

14. A5%. The labor force includes those who are working or those who are unemployed but actively looking forwork. The unemployment rate is the percentage of the unemployed people in the labor force. Tocalculate the rate of unemployment, divide the number of unemployed by the number in the labor force(8.5 million 170 million = .05 or 5%). The rate of unemployment is used to analyze the condition of theeconomy. A low unemployment rate indicates a healthy economy because most of the people who wantto work are working. On the other hand, a high unemployment rate indicates a slowdown in the economywith fewer goods and services produced and many people out of work.SOURCE: EC:082SOURCE: McConnell, C.R., & Brue, S.L. (2005). Economics: Principles, problems, and policies

(16th ed.) [pp. 135-136]. Boston: McGraw-Hill/Irwin.

15. AGeographic location. Geographic location is a secondary dimension of diversity. Secondary dimensionsof diversity are those characteristics that may change at various points throughout one's lifetime. Theyinclude differences in language, religion, income, geographic location, family status, work experience,communication style, and education level. Race, ethnicity, and gender are primary dimensions ofdiversity. The primary dimensions are those inborn differences that cannot be changed and affect aperson's entire life.SOURCE: EI:033SOURCE: EI LAP 11Getting to Know You (Cultural Sensitivity)

16. DPreparation. Many experts believe that the key to getting what you want out of a negotiation dependsupon how prepared you are for the session. Determining exactly what you will and will not give up beforethe negotiation is crucial. Also, it is important to research and obtain information you don't have, analyzethe other side, and practice your responses by visualizing various situations and strategies. A concessionis something that a person gives up during the negotiation. Assessment is the last step in the negotiationprocess in which the negotiator reviews how the negotiation went and determines changes s/he shouldmake for the next negotiating session. Mediation is the involvement of a neutral third party to help resolvea conflict.SOURCE: EI:062SOURCE: EI LAP 8Make It a Win-Win (Negotiation in Business)


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17. CDiscuss why everyone should agree. In reaching a consensus by an informal method, three of the stepsare to (1) Write down your ideas, (2) Revise your idea list, and (3) Create a list of alternatives. Discussingwhy everyone should agree is not one of them, because not everyone has to agree. Coming to aconsensus might be impossible.SOURCE: EI:011SOURCE: QS LAP 17All Aboard

18. CDetermine how much money you have and how much you will need. When determining necessaryresources to turn your vision into a reality, you must figure out what resources (such as money) you haveavailable to you right now, as well as what resources you don't have, but will need in the future. It isn'tenough to determine only how much money you already have or only how much you will need next year.It would be impossible, however, to predict how much you might need for the next 20 years.SOURCE: EI:063SOURCE: QS LAP 11Picture This

19. ANot being satisfied with current performance. Carmen is not satisfied with her current performance. Shewon't be happy unless she can achieve an improvement on her accuracy rating next year. In thisscenario, Carmen is not taking a moderate risk, demonstrating leadership, or desiring feedback.SOURCE: EI:027SOURCE: EI LAP 10High Hopes (Developing an Achievement Orientation)

20. DEveryone reacts differently to change. Life is all about changes. Nothing ever stays the same. Somechanges are good, and some changes are bad. And sometimes, it just depends on who you are and howyou look at it. Change comes in various forms, and people react to it in many different ways, but oneaspect of change is constantit is unavoidable!SOURCE: EI:005SOURCE: QS LAP 2320/20 Foresight

21. C

Interdependent. Things and people are said to be interdependent if they must rely upon one another forsome reason. Being self-sufficient means relying on one's self. Being efficient is doing things withoutwasted time or effort. An ineffective worker is one who has trouble carrying out his/her jobresponsibilities.SOURCE: EI:037SOURCE: EI LAP 5Can You Relate?

22. BCredit. Businesses use credit to obtain goods and services to sell, and consumers use credit to purchasethose goods and services. Interest is the fee that lenders charge borrowers for the use of credit. Capacityis the individual's ability to earn income, one of the three C's of credit. Collateral is anything of valuebelonging to the borrower which is pledged to the lender to guarantee that the loan will be repaid.SOURCE: FI:002SOURCE: FI LAP 2Credit and Its Importance

23. ACollectibles. Items that gain or lose value over time are collectiblessuch as antiques, gems, stamps,dolls, and sports memorabilia. Collecting usually involves owning these items, waiting until theybecome really valuable, and then selling them for a profit. With stocks and stock mutual funds, investorsown pieces of corporations or agencies. With real estate investments, investors own property.SOURCE: FI:077SOURCE: QS LAP 32Risky Business


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24. CAccounting information. Accounting is the process of keeping financial records. The accountinginformation in these records helps managers to make financial decisions that affect the business. Theaccounting information indicates to managers how much money they can spend for activities, such ashiring more staff. A profit-and-loss statement is an income statement which shows how much money thebusiness has made or lost. Journals are special books or computer programs in which a business'stransactions are recorded in the order in which they occur.SOURCE: FI:085SOURCE: FI LAP 5Show Me the Money (Nature of Accounting)

25. A$12,750. Ending cash balance is the money that a business has left at the end of the month. It iscalculated by subtracting total cash paid out from total cash receipts. A business's assets, unless sold forcash during the month, are not part of cash flow. In this example, subtract total cash paid out from totalcash receipts to determine ending cash balance ($41,250 - $28,500 = $12,750).SOURCE: FI:091SOURCE: FI LAP 6Count the Cash (Cash Flow)

26. AGive receipts to all customers. Most businesses use a variety of procedures to control cash. One of theseis to train employees how to use the cash register and require that they ring up each sale on the registerand give receipts to all customers. When an employee rings up a sale, the register automatically recordsthe sale and prints a customer receipt. This procedure helps to control cash because it reduces thepossibility of employees accepting payment from customers without recording the sale and issuing areceipt. Monitoring intangible assets, tracking dividends paid to owners, and evaluating projected budgetsare not internal procedures that many businesses use to control cash.SOURCE: FI:113SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business

decisions (pp. 270-271). Orlando, FL: Harcourt.

27. ACredit memorandum. A credit memorandum is a source document that tracks transactions. A transactiontakes place when a business accepts returned goods from a customer. One way to track this type oftransaction is to prepare a credit memorandum. The customer receives a copy of the memorandum andthe business keeps a copy to verify that the customer is entitled to a credit. The memorandum becomesa business document. Businesses do not prepare uncollectible records, expenditure reports, or liabilitydocuments to track the transaction when a customer returns an item.SOURCE: FI:115SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000). Accounting: Information for business


28. AAmount to pay. Accounts payable checks are checks that businesses process to pay creditors. In manysituations, the creditors are vendors or suppliers that offer the business terms to encourage promptpayment. Businesses factor in these terms in order to calculate the amount to pay when processingaccounts payable checks. For example, if a business is paying an invoice that lists terms of 2/10, n/30,the business knows that it can take a 2% discount if it pays within 10 days. Before processing the check,the business first calculates the discount and subtracts it from the original invoice amount to determinethe actual amount to pay. Businesses do not factor in the invoice terms in order to calculate the rate ofinterest, sales tax, or gross profit.SOURCE: FI:117SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C.A. (2009). Marketing essentials

(pp. 116, 349-351). Woodland Hills, CA: Glencoe/McGraw-Hill.


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29. CDiscount terms. Accounts payable are debts or liabilities. In many cases, accounts payable includemoney owed to suppliers for purchases made on credit. Businesses often prepare an accounts payableschedule based on available discount terms that have been offered by suppliers. For example, a suppliermight offer terms of 3/15, n/30 which means that the business can take a 3% discount if it pays within 15days. To take advantage of the discount, a business might schedule to pay that account prior to the 15-day deadline. Businesses do not prepare accounts payable schedules based on available interest rates,tax deductions, or credit balances. Accounts payable are credit balances that a business owes.SOURCE: FI:119SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


30. ASales discounts. When businesses prepare customer statements, they often indicate if sales discountsare available. Sales discounts encourage customers to pay quickly to reduce the amount of the invoice.However, discounts also reduce sales revenue because customers are allowed to pay less than theoriginal amount. If a business is offering a sales discount, it clearly states the terms of the discount on thecustomer's statement such as 5/15, n30. This tells the customer that 5% can be deducted from theamount due if the customer pays within 15 days. Businesses usually do not include ordering information,credit policies, or loan principals on invoices when preparing customer statements.SOURCE: FI:128

SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for businessdecisions (p. 442). Orlando, FL: Harcourt.

31. C$24,800. Sales returns involve customers returning products which result in no sale. Allowances involvegiving customers additional discounts or refunds of part of the original purchase price. Both situationsresult in deductions from sales revenue. In this example, the business processed sales returns thatequaled 6% of total sales. To calculate that amount, multiply total sales by the percent of returns($375,000 x 6% or .06 = $22,500). The business also gave sales allowances of $2,300. Add both figuresto determine the amount the business should deduct from sales revenue ($22,500 + $2,300 = $24,800).SOURCE: FI:126SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


32. BEmployee earnings. Businesses maintain payroll records for each employee that contain informationabout hours worked, wages, payroll date, type and amount of deductions, etc. Businesses maintainemployee earnings records to be able to accurately compensate employees for their time and effort.Businesses also use this information to monitor the amount of money they pay employees becauseemployee compensation is a major business expense. Accounts payable are the monies owed by thebusiness to others. However, this does not include employees. Liabilities are debts the business owes.Cash disbursement records contain information about cash payments. Employees usually are not paid incash.SOURCE: FI:134SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)

[p. 391]. Cincinnati: South-Western.

33. CMost aspects of a business. Comparing budgeted and actual amounts can be used to evaluate mostaspects of a business. Most aspects of a business are quantified in its budget and, therefore, can beevaluated by comparing budgeted and actual amounts (variances). These variances are not necessarilyhelpful in evaluating employee performance, and definitely are not helpful in evaluating the level ofcompetition or the accounting department.SOURCE: FI:106SOURCE: FI LAP 3Money Tracks (Nature of Budgeting)


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34. D$53,975. A sales forecast is a prediction of what a firm's sales will be during a specific future time periodusing a certain marketing plan. Among the factors that affect the sales forecast are changes in theeconomy. In this case, sales are expected to drop 15%, and 15% of $63,500 would be subtracted fromlast year's sales ($63,500 x 15% or .15 = $9,525; $63,500 - $9,525 = $53,975).SOURCE: FI:096SOURCE: Etzel, M.J., Walker, B.J., & Stanton, W.J. (2007). Marketing(14th ed.) [pp. 160-164]. Boston:

McGraw-Hill/Irwin.

35. AMonitor profit. Businesses need to know whether they are making a profit. By developing an accountingsystem and keeping accounting records, businesses can track their financial activities to determine if theyare earning a profit. If businesses do not monitor this information, they may eventually discover that theyare losing money and can no longer operate. It is important for businesses to maintain accountingsystems to monitor profit so they will have sufficient funds to pay employees and buy equipment. Aneffective accounting system helps business to analyze their finances and develop budgets.SOURCE: FI:107SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)

[pp. 383-384]. Cincinnati: South-Western.

36. B$519,285. Businesses must pay sales tax to the state on all taxable sales. Sales that are exempt fromsales tax can be subtracted from gross sales. In this situation, subtracting $29,925 from $549,210 leavesan amount due of $519,285 ($549,210 - $29,925 = $519,285).SOURCE: FI:090SOURCE: Stull, W.A. (1999). Marketing and essential math skills: Teacher's edition(pp. 134-137).

Cincinnati: South-Western Educational.

37. ALiabilities. Liabilities are debts, usually money, that a business owes. Liabilities are a component of thebasic accounting equation. Businesses consider liabilities when applying the accounting equation totransactions because liabilities affect a business's assets. Businesses try to limit liabilities in order tohave more capital available. Receivables are all the monies owed to the business. Cash flow is themovement of funds into and out of a business. Net profit is the money remaining after operatingexpenses are subtracted from gross profit.SOURCE: FI:108SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)


38. BMaking errors in recording financial data. A chart of accounts is a numbering system that helpsbusinesses to organize their accounts. Each type of account is assigned a specific number. This systemhelps to reduce the possibility of making errors in recording financial data because the number mustcorrespond to the account. For example, if the accounts payable account has a corresponding number of405, then both the name and number will appear on financial records. As a result, it is more difficult tomake recording errors. A chart of accounts lists the business's accounts rather than the accounts of eachcustomer. Customer accounts are listed under the category of accounts receivable, which has anassigned number. Businesses do not develop a chart of accounts to reduce the possibility of overpayingthe utility expense or depreciating new equipment.SOURCE: FI:110SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business



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39. DCustomer buys goods for $5,000 and pays in 15 days. A business's cash flow includes all of the moneygoing into and coming out of the business. If a customer buys goods and pays quickly, such as in 15days, the business is experiencing a positive cash flow because it is receiving the money it needs tocover expenses. The customer who buys $5,000 worth of goods and pays in 15 days is increasing thebusiness's cash flow. Customers who buy goods for $10,000, $25,000, or $30,000 but do not pay forextended periods of time decrease a business's cash flow, because the business is not receiving themoney that it needs to pay other expenses.SOURCE: FI:100SOURCE: CCH Inc. (n.d.). Profit vs. cash flow. Business owner's toolkit.Retrieved October 7, 2008,

from http://www.toolkit.cch.com/text/P06_4112.asp

40. DTo monitor profitability. Businesses usually keep track of, and analyze, daily transactions which includecash sales, credit sales, and items returned. These transactions are important because they affect abusiness's profitability. For example, if a business has a lot of returns, the value of the returned items issubtracted from daily cash sales. As a result, the business is less profitable that day. Businesses do notanalyze daily transactions to calculate payroll, verify tax data, or determine liquidity.SOURCE: FI:112SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


41. DTo prevent shortages. Evaluating cash-handling techniques is important because ineffective methodsoften lead to losses for the business. For example, a business might decide to stop paying cash for smallpurchases as a result of evaluating that procedure and discovering that many times those payments werenot recorded. The business spent money and has no record of the expense which results in a shortage ofcash. Auditing payments, reconciling deposits, and counting change funds are cash-handling techniquesthat businesses might evaluate.SOURCE: FI:114SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)


42. DAvailability of cash. Accounts payable are all the monies a business owes to others. In order to pay theseaccounts, businesses need cash. As a result, businesses usually try to control their accounts payable tocorrespond to the availability of cash. If a business knows money will be coming in, it can plan to makepurchases because it will be able to pay its bills when they are due. Businesses do not control theiraccounts payable by monitoring the value of assets, the amount of credit to extend, or the type of rawmaterials.SOURCE: FI:120SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)


43. ACosting procedures. Businesses use some type of costing procedures to track and calculate the expenseinvolved in producing products. Costing procedures take into consideration the various costs involved,such as raw materials and labor, as well as the process used to produce products. Then, businessesassign costs to the various production activities, and track those costs to calculate the total costs involvedin producing products. Purchasing policies are the rules businesses follow when purchasing materialsand supplies. Ordering techniques are the methods used to place orders. Selling methods are thetechniques used to sell products.SOURCE: FI:121SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business



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44. BDirect and indirect labor. There are three main categories of costs associated with implementing costingprocedures: raw materials, labor, and overhead. Labor costs include both direct and indirect labor. Directlabor costs are those costs incurred by the employees who actually produce the product. Indirect laborcosts are those costs associated with fringe benefits for employees and for employees performing tasksnot directly related to producing products. Indirect labor costs are included in the overhead categoryrather than in the labor category. Net profit and loss, dividends, and sales returns and allowances are notexpenses that a business considers when implementing costing procedures. Businesses might considerinterest rates if there are loans associated with purchasing raw materials.SOURCE: FI:122SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


45. BTo analyze unpaid balances. Businesses age accounts receivable to track customer payments. Manybusinesses sell on credit and send invoices to customers. Some customers pay in a timely manner whileothers are slow. Businesses need to age accounts to track unpaid balances and contact delinquentcustomers when necessary. If they do not age accounts, businesses may be unable to collectreceivables. Businesses do not age accounts to organize accounting information, determine cost ofgoods sold, or prepare operational reports.SOURCE: FI:129

SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)[pp. 490-492]. Cincinnati: South-Western.

46. AAccounts receivable. Accounts receivable are the monies owed to a business by its customers.Controlling accounts receivable is an important function because businesses need to collect fromcustomers to have cash to pay expenses and continue to operate. Businesses often control accountsreceivable by following up with customers when they are past due, setting credit limits, requiring deposits,requiring COD purchases, etc. Businesses usually take whatever measures are necessary to controlaccounts receivable to obtain payment in a timely manner. Net worth is the total value of the business. Asales trend is the direction in which sales are moving. Economic conditions indicate the state of theeconomy.SOURCE: FI:130

SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for businessdecisions (pp. 420-421). Orlando, FL: Harcourt.

47. DAccount for the bad debt. In some situations, businesses have difficulty collecting receivables fromcustomers for a variety of reasons. When that occurs, businesses usually evaluate their ability to collectin order to decide how to account for the bad debt. If a customer has filed for bankruptcy or gone out ofbusiness, it may be impossible to collect receivables. Then, the business might decide to write off, oreliminate, the entire debt. In other cases, the business may work with the customer to obtain at leastpartial payment and write off only a portion of the debt. Businesses do not evaluate their ability to collectreceivables in order to decide how to calculate late penalties, report earned interest, or depreciate oldassets.SOURCE: FI:132



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48. CWorking at home. Businesses process payroll time cards to prepare the payroll. Time cards often indicatethe hours worked as well as an explanation of the type of work. For example, some businesses requireemployees to specify the amount of time they worked on certain projects, such as three hours on ProjectA. Also, some businesses allow employees to work at home and indicate this time on a time card.Working at home is time for which employees must be compensated if businesses know the employee isworking at home and the business has a policy that permits working at home. Businesses are notrequired to compensate employees for the time spent driving to work or for attending training that isvoluntary. Businesses usually do not have to compensate employees for being on call if the employeesare at home and free to do whatever they want during that time.SOURCE: FI:135SOURCE: CCH Inc. (n.d.). What counts as compensable work?Business owner's toolkit. Retrieved

October 8, 2008, from http://www.toolkit.cch.com/text/P05_4115.asp

49. A$607.50. In most cases, part-time employees are paid only for the hours they work and are not paid forvacation or sick time. In this example, the employee missed one day of work during the two-week payperiod for which s/he will not be paid. To calculate the base pay for the two-week pay period, firstdetermine the number of hours worked by multiplying the days worked by the hours per day (5 hours x 9days = 45 hours). Then, multiply the hourly rate by the number of hours ($13.50 x 45 = $607.50).SOURCE: FI:136

SOURCE: CCH Inc. (n.d.).Are incidental activities compensable?Business owner's toolkit. RetrievedOctober 8, 2008, from http://www.toolkit.cch.com/text/P05_4117.asp

50. CExpenses. Allocating payroll costs is a two-part process. First, a business deducts the amount of payrollfrom cash assets. Then, the business adds that same amount to the expenses category. Payroll is anexpense to a business that is recorded as a decrease in cash assets as well as an increase in expenses.Accounts payable are the monies a business owes to other businesses, but does not include payroll.Assets are anything of value that a business owns. Payroll is deducted from cash.SOURCE: FI:139SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


51. CTo calculate current value. Inventory is a business asset that has monetary value. When a businessreceives new inventory, the value of the current inventory increases. The accounting department needsto verify the receipt of new inventory in order to keep track of the value. This information is included in thebusiness's financial reports. Also, at the end of the business's fiscal year, the business must pay tax onthe value of the current inventory. The accounting department is responsible for keeping this informationcurrent. A business's accounting department does not verify the receipt of new inventory to regulate cashflow, process accounts receivable, or analyze the transaction. The receipt of new inventory usuallyaffects accounts payable rather than accounts receivable.SOURCE: FI:142SOURCE: Pinson, L., & Jinnett, J. (1998). Keeping the books: Basic recordkeeping and accounting for

the small business (4th ed.) [pp. 32-37]. Chicago: Upstart.

52. CTo determine an operating expense. Depreciation is the loss of value of a business's assets over aperiod of time. Many assets, such as equipment and furniture, lose value as they are used, andeventually must be replaced. This is a loss to a business that becomes an operating expense.Businesses usually set up a depreciation schedule to calculate the loss on a yearly basis. For example, abusiness might depreciate a $1,000 piece of equipment by $200 each year and list the $200 as anoperating expense. Businesses do not calculate depreciation to decide when to buy new equipment,evaluate accounts receivable, or set up an inventory procedure.SOURCE: FI:143SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)



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53. BDepreciates assets higher the first year and less in subsequent years. Under the accelerated method, abusiness depreciates assets higher the first year and less in subsequent years. The amount ofdepreciation listed on financial statements has an effect on the amount of taxes a business will pay. If abusiness depreciates assets more in the first year, it will pay less taxes because the value of the assethas decreased. Depreciating an asset by the same amount each year for the life of an asset is anexample of the straight-line method of depreciation. Depreciating assets according to the purchase priceis not an example of the accelerated method. Businesses depreciate assets over a period of time insteadof only one year.SOURCE: FI:144SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


54. A$727.50. Offering cash discount terms is a sales policy that affects income statement reporting because itdecreases sales revenue by the amount of the discount. Businesses include on the income statementonly the amounts that customers actually pay for products rather than the original price. In this example,the business is offering cash discount terms of 3/15, n/30 on a product priced at $750. If the customerpays within 15 days, the customer is entitled to a 3% discount. Calculate the amount the business willreport on its income statement by determining the amount of discount ($750 x 3% or .03 = $22.50). Then,subtract the discount from the original price ($750.00 - $22.50 = $727.50).

SOURCE: FI:147SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


55. CTo prevent loss. Businesses maintain a certain amount of assets in the form of cash to be able to payexpenses. Businesses also take in cash on a regular basis in the form of cash payments or checks fromcustomers. It is important for businesses to manage the cash balance to make sure all the funds areaccounted for accurately. If they do not, the opportunity exists for employees or others to make mistakes,fail to report cash payments, or tamper with the cash in other ways. The result often is a loss to thebusiness. A business does not manage its cash balance to earn interest, make investments, or chartsales.SOURCE: FI:150


56. BTo prevent an exchange loss. When a business in one country buys products from a business in anothercountry, the two businesses must agree on the currency that will be used to pay for the products.Businesses often want to pay for purchases in the currency of their country, such as in U.S. dollars, toavoid a problem if the exchange rate changes. For example, if the exchange rate changes and thecurrency of Country B is worth more than the currency of Country A, the business in Country A will paymore for the products if it has agreed to pay in the currency of Country B. This results in a loss for thebusiness in Country A. A business would not arrange to pay in the currency of another country to simplifythe procedure, take advantage of a discount, or increase the payment time.SOURCE: FI:151



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57. CSavings accounts. Liquidity refers to a business's ability to turn investments into cash. To increase theirliquidity, businesses often keep emergency cash in savings accounts because it is fairly easy to removecash from those accounts. If the business has unexpected expenses, it can transfer funds from a savingsaccount to a checking account to pay bills. It is not as easy to obtain cash from certificates of deposit,mutual funds, and government bonds because these investments usually are for an established period oftime and have penalties attached for early withdrawal.SOURCE: FI:153SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)


58. A$225. If the Canadian dollar is worth $.90 in the U.S., then the Canadian dollar has less value than theU.S. dollar. Therefore, the Canadian dollar will convert to fewer dollars and have less purchasing powerthan the U.S. dollar. To convert 250 Canadian dollars to U.S. dollars, multiply the Canadian dollars by thevalue in U.S. dollars (250 x $.90 or .90 = $225).SOURCE: FI:154SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


59. COperating cycle. An operating cycle is the length of time it takes a business to buy or produce products,sell products, and collect payment from customers. Operating cycles are different depending on the typeof business. Some businesses buy and sell products quickly while other businesses, such as advertisingagencies, provide services over a long period of time and may collect payments only at the end of theadvertising campaign. By considering the operating cycle, a business is able to budget funds to coverexpenses based on when customers pay. The budgeting process is not based on the business's payrollsystem, purchasing process, or delivery schedule.SOURCE: FI:155SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


60. DEconomic conditions. Economic conditions reflect the state of the economy at any given time. Whenpreparing a sales budget, businesses consider the current economic conditions because they will havean effect on sales. If the economy is prospering, customers will have more money to spend sobusinesses may estimate increased sales. On the other hand, customers will spend less if the economyis depressed. Inventory levels are a factor when developing a merchandising budget. Businesses do notconsider operating expenses or maintenance costs when preparing a sales budget.SOURCE: FI:157SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)


61. ACommission. Businesses prepare selling expenses budgets to account for all the expenses associatedwith selling. Most businesses have fixed expenses as well as variable expenses. Variable expenses arethose that change according to the volume of sales. An example of a variable expense is commission. Ifa business pays salespeople a commission based on sales, the commission changes. By estimating thatexpense when preparing a selling expenses budget, a business will have an idea of what it will need topay salespeople. A selling expenses budget does not include an estimate of purchases or depreciation.Utilities are considered fixed expenses because they do not change according to the volume of sales.SOURCE: FI:159SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business



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62. BIt is earning the desired level of profit. A projected income statement lists a business's expectedexpenses and revenues for a certain period. It is actually the plan the business hopes to follow to earnthe desired level of profit. By evaluating a projected income statement, a business can compare theprojections with actual figures to determine if it is earning the estimated profit. If profit is less thanprojected, a business can take steps to correct the problem. Businesses do not evaluate projectedincome statements to determine if cash is available to cover expenses, if its assets are more than itsliabilities, or if the owner's equity is increasing.SOURCE: FI:160SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business

decisions (p. 102). Orlando, FL: Harcourt.

63. CLast year's results. A balance statement indicates the financial condition of the business at that particularmoment. Some businesses develop projected balance statements based on how they think the businesswill perform in the future. Then, they evaluate the projected information by comparing it to last year'sresults. If a trend indicates the business is growing, it is realistic to project an increase in revenue andassets. During the process of evaluating a projected balance statement, businesses do not compare thebalance statement with investment opportunities, future credit options, or capital expenditures.SOURCE: FI:161SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)


64. CAchieving the desired level of profit. The master budget is the overall financial plan for a business over aperiod of time, usually one year. It indicates all estimated revenues and expenses. By comparing themaster budget to the business's actual performance, the business can determine if it is operating asplanned and achieving the desired level of profit. A business cannot determine if it is paying invoicesbefore the due date, following the standards of the industry, or buying products from the lowest bidder bycomparing the master budget to the business's actual performance.SOURCE: FI:162SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


65. CActual cost. Many businesses have long-term liabilities, or debts, because they have borrowed money topurchase expensive equipment or property. These liabilities are paid off over a long period of time, suchas 10 or 20 years. As a result, the actual cost of the long-term liabilities is more than the original cost ofthe equipment or property. For example, a 10-year loan on $100,000 includes interest. Over the period of10 years, the business pays significantly more than the $100,000. Businesses evaluate these liabilities inorder to calculate the actual cost, and list the actual value of the liability on financial records. Cash flow isthe money coming in and going out of a business. Businesses do not evaluate long-term liabilities tocalculate payroll tax or net profit.SOURCE: FI:167SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business



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66. CTo make future decisions. Businesses estimate expense over a period of time and then compare it toactual expense to account for differences. Actual expense may be more than the estimate, or it may beless than the estimate. In either case, businesses use the information to make future decisions. Forexample, a business might find that the cost of supplies has increased slightly over a period of one yearso that expense is more than the estimate. In the future, the business might decide to buy from a differentvendor or purchase lower-quality supplies to reduce the amount of expense. Businesses do not accountfor differences between actual and estimated expense to plan collection procedures, review salesreturns, or generate source documents.SOURCE: FI:168SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


67. BConsolidation. If a business owns more than 50% of the common stock of another business, it hascontrol over the other business and is considered the parent company. The other business is asubsidiary. In this case, both companies maintain separate financial records throughout the year.However, at the end of the year the parent company prepares consolidated financial statements thatcover both companies. The consolidation method allows a company to account for all the companiesover which it has control. The equity method is used if a business owns between 20% and 50% ofanother business. The market value method is used if a business owns less than 20% of another

business. External is not a method of accounting for investments in other companies.SOURCE: FI:125SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


68. DOvertime. When an employee works additional time that s/he was not scheduled to work, it is referred toas overtime. Although it depends on the jurisdiction (state), many governments require that businessespay hourly employees for authorized or unauthorized overtime. Businesses usually require hourlyemployees complete a manual time sheet or enter a timecard in an automated machine to indicate theirhours, which includes any overtime they work. Then, the employer must verify the payroll data andcompensate employees for that time. Insurance, local taxes, and union dues are types of deductions thatmay be taken out of the employee's pay.

SOURCE: FI:138SOURCE: Business Owner's Toolkit. (n.d.). What counts as compensable work?Retrieved November

25, 2008, from http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P05_4115

69. BQuarterly. Businesses are required to generate payroll tax reports on a quarterly basis, and send thereports and the tax payments to the government. The year is divided into four quarters ending in March,June, September, and December. At the end of each quarter, businesses report payroll tax to thegovernment. At the end of the year, businesses compile year-end reports that summarize the informationthat was submitted quarterly. This information must agree with the quarterly information. Businesses donot generate payroll tax reports and send tax payments to the government on a monthly or semi-annualbasis.SOURCE: FI:140

SOURCE: Guerrieri, D.J., Haber, F.B., Hoyt, W.B., & Turner, R.E. (2004).Accounting: Real-worldapplications & connections (Advanced Course) [pp. 323, 359]. New York: Glencoe/McGraw-Hill.


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70. BEconomic benefits. Businesses have intangible assets as well as tangible assets that must be valued andreported on financial statements. Intangible assets often include patents, copyrights, goodwill, etc., thatprovide economic benefits to the business. For example, goodwill is valuable because a business's nameand reputation often attract customers and increase sales. Therefore, goodwill is an intangible asset thathas value and benefits the business. Businesses do not value and report intangible assets on financialstatements because the assets have residual expenses, short lives, or maintenance costs.SOURCE: FI:146SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


71. DTo reimburse employees. Most businesses reimburse employees for out-of-pocket expenses, such astravel and entertainment. To obtain reimbursement, employees complete a voucher explaining theexpenses and usually include receipts. Once the business receives the voucher, the accountingdepartment processes the voucher and authorizes payment to the employee. Businesses do not processvoucher forms to pay purchase orders, make requests of vendors, or control operating costs.SOURCE: FI:164SOURCE: University of Illinois. (2002, October). Business and financial policies and procedures.

Retrieved October 8, 2008, from http://www.obfs.uillinois.edu/manual/central_p/sec8-2.html

72. C$206,375. Corporations pay cash dividends to investors who own shares of stock in the company.Dividends are based on a company's earnings and are a share of profits paid to stockholders. Tocalculate the cash dividends a business owes, multiply the per-share dividend by the number of commonshares ($825,500 x $ .25 = $206,375).SOURCE: FI:165SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


73. CHistorical cost. Businesses usually follow generally accepted accounting procedures (GAAP) whenreporting inventory on financial statements. One accepted procedure is the historical cost concept whichis based on reporting the value of inventory according to the price the business paid for the transaction. Ifa business buys a product for $15, the cost of the transaction is $15 and that is the value of the inventory.Using the market value concept involves reporting the product's value today, which may be lower thanthe price paid. Estimated profit and sales expense are not methods of reporting the value of inventory.SOURCE: FI:169SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


74. ADetermine the employee's attitudes and feelings about the company. Exit interviews are used bycompanies to learn about the views of employees who are leaving the organization. It is a learningprocess that can assist a company in making changes that will help the company operate moreeffectively in the future. Conducting exit interviews does not help to shield the company from future legalaction. At the time of the exit interview the employee has already made the decision to leave, and theinterviewer should not try to change the employee's mind. The employee's wage at the time of departuredoes not assist the company in making changes.SOURCE: HR:357SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)



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75. CReduces turnover. The purpose of orienting new employees is to introduce them to the business andtheir new work environment, which includes supervisors and coworkers. When new employees areoriented properly, the turnover rate decreases because the new employees feel comfortable in their newsurroundings and understand their role. One cause of high turnover among new employees is a lack ofproper orientation because they do not know what is expected of them. Orienting new employees doesnot necessarily increase profit or eliminate training. The purpose of orientation is to provide information.SOURCE: HR:360SOURCE: Desimone, R., Werner, J., & Harris, D. (2002). Human resource development(3rd ed.)

[pp. 300-301]. Orlando, FL: Harcourt.

76. BTeasing. Harassment is any kind of behavior toward another person that is carried out for the purpose ofannoying the individual. Teasing is a form of harassment because it is a way of poking fun at a personthat can be done in an annoying manner. Mentoring is assisting a new worker to become established inthe job or to move up the ladder. Evaluating is a way of determining an employee's level of competenceon the job. Promoting is moving an employee to a higher level job position.SOURCE: HR:367SOURCE: MN LAP 55Managing Diversity in the Workplace

77. CCover all of the critical aspects of the complaint. Your objective in documenting the resolution of anemployee complaint is to have proof of the way in which the problem was resolved. You should recordthe critical aspects of the complaint and the disposition of the problem and keep a copy in an individual'spersonnel file and/or in a master complaint/grievance file. This documentation, which need not belengthy, can be quite useful, especially in case of a grievance or a lawsuit. The documentation is themanager's responsibility and should not be delegated to an employee.SOURCE: HR:366SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C.A. (2009). Marketing essentials (p. 248).

Woodland Hills, CA: Glencoe/McGraw-Hill.

78. BCommission. This system compensates employees based on their volume of sales. Piece rate ispayment for each piece of work completed. Time wage is payment for each hour of work. Salary is aspecific amount paid for a certain time period worked.SOURCE: HR:351SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management(11th ed.)


79. BProduction and consumption of goods and services. The marketing process is made up of activities thathelp to link producers to consumers so that exchanges can take place. All other alternatives are aspectsof the marketing process and strategy that help support the the overall objective.SOURCE: MK:001SOURCE: BA LAP 11Have It Your Way

80. DQuality. Roger would have benefited from quality recordsrecords that are accurate and reliable.Archived records (stored for the long-term), digital records (stored in a computer-related medium), andrequired records (mandated by a governing authority) may or may not be quality records.SOURCE: NF:001SOURCE: NF LAP 1Record It (Business Records)


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81. BIrregularities. Most businesses use computerized systems to perform the payroll accounting process.This is a fast and effective method because the computerized system accurately performs all of thenecessary calculations. The benefit to businesses is that they can monitor the system and reviewprintouts which will indicate any irregularities in the payroll process. For example, a computer printoutmight show an unusual amount of overtime pay that is significantly increasing the business's operatingexpenses. By identifying the irregularity, businesses can take steps to correct the problem and savemoney. Deductions and allowances are withholdings from employee's earnings.SOURCE: NF:017SOURCE: Guerrieri, D.J., Haber, F.B., Hoyt, W.B., & Turner, R.E. (2007).Accounting: Real-world

applications & connections (First-Year Course) [pp. 323-324]. New York: Glencoe/McGraw-Hill.

82. CFinancial reports. Businesses are required to provide a variety of financial reports to many groups ofpeople, such as governments for tax purposes and creditors for lending purposes. Therefore, businessesmaintain accounting information that they use to prepare these financial reports. Depending on the sizeof the business, the accounting information may be simple or complex. Businesses do not useaccounting information to prepare operating procedures, inventory controls, or pricing systems.SOURCE: NF:016SOURCE: Cunningham, B.M., Nikolai, L.A., & Bazley, J.D. (2000).Accounting: Information for business


83. CA safe work environment. Accidents and their costs can be reduced considerably if accounting firmscreate safe work environments. Unsafe conditions can be prevented more easily than unsafe acts.Therefore, accounting firms should create safe work environments that prevent their employees frommaking hazardous mistakes. Comfortable lounge areas, attractive furnishings, and convenient lunchrooms are not factors that help prevent accidents and injuries.SOURCE: OP:009SOURCE: Clark, B., Sobel, J., & Basteri, C. G. (2006). Marketing dynamics (pp. 406-410). Tinley Park,

IL: The Goodheart-Willcox Company.

84. BProject manager. The person responsible for planning a project is usually the same person who isresponsible for carrying it out: the project manager. Under the project manager, project assistants,coordinators, and schedulers may work on parts of the planning or information related to the planning.But they are not responsible for planning the entire project.SOURCE: OP:001SOURCE: QS LAP 28From Here to Done

85. DPurchasing. As a marketing function, purchasing involves planning, establishing and followingprocedures in order to obtain goods and services for use in the business or for resale. Businesses mustbuy things that enable them to operate successfully. All businesses in our society engage in purchasing.Selling is a marketing function that involves responding to consumer needs and wants through planned,personalized communication in order to influence purchase decisions. Promotion is a marketing functionthat communicates information about goods, services, images, or ideas to customers or clients. Riskmanagement is a marketing function that involves the procedures management uses to limit businesslosses and to optimize the relationship of potential loss to gain.SOURCE: OP:015SOURCE: OP LAP 2Buy Right (Purchasing)


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86. DHas enough items on hand to run the business smoothly. Accounting firms need supplies so that theycan operate efficiently. If an accounting firm runs out of printer toner, it cannot print letters, reports, orinvoices, or conduct other activities that are necessary to keep the firm up and running. To reduce therisk of running out of supplies, accounting firms often develop inventory control systems to track theirsupplies. Since Porter and Barnes is an accounting firm, it sells services and, therefore, does not sell theoffice supplies to clients. Generally, small firms do not need as many office supplies as big companies.Because Porter and Barnes is a small accounting firm, it probably does not purchase too many items inbulk. Suppliers do not always offer free shipping. Businesses do not incur storage costs if their suppliesare stored on their premises.SOURCE: OP:031SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (p. 355). Tinley Park, IL:

Goodheart-Willcox.

87. AFind ways to improve. Accounting firms that have a quality culture are continually trying to improve thefirm, its services, and its relationships with clients. As part of this overall movement to create quality,accounting firms encourage all employees to find ways to improve. Employees contribute to the qualityculture by finding ways to do their jobs better and more efficiently, by suggesting ways to improve theproduct, and by doing everything they can to serve the client. Involving employees is often the best wayto create a quality culture. Creating a quality culture does not involve encouraging employees to give up

their authority, compete for attention, or work without supervision.SOURCE: OP:019SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work(pp. 282-283). New

York: Glencoe/McGraw-Hill.

88. B$86.25. One of the biggest business expenses is payroll. If employees come in late and leave early, theyare increasing the business's expenses because they are being paid for time that they do not work. Inthis example, three employees come in 15 minutes late and leave 15 minutes early which amounts to 30minutes per day per employee for a total of 90 minutes per day (15 + 15 = 30; 30 x 3 = 90). To calculatethe total number of minutes for the week, multiply that time by five days (90 x 5 = 450) whic

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