30 Questions
Which financial system records all income and expenses as they occur in the general ledger?
Accrual system
What does a statement of income and expenses provide?
A summary of income, expenses, and profit or loss
What does a balance sheet indicate?
Assets, equity position, liabilities, and debts
What should an architect establish when engaging an accountant?
The services to be provided, financial reports, and professional fee
According to the text, what is the purpose of setting aside a percentage of the profit as a capital reserve?
To build a successful financial history for borrowing funds
What are some factors that should be considered in determining the distribution of bonuses to staff?
Ability and professional growth
In 'lean' years, what may happen to the capital reserve?
It may be very little or non-existent
What is the purpose of proper tax planning in relation to profit withdrawal from the practice?
To reduce the amount of profit withdrawn
Which type of accounting is done within the architectural practice, often by staff or a bookkeeper?
Internal accounting
What should the financial plan of an architectural practice include?
All of the above
What is the purpose of short-term financial planning, usually called budgeting?
To project income and expenses for a 12-month period
What is an audit in the context of accounting?
An independent and objective examination of accounting records
Which of the following factors may lead to inadequate profit margins for an architectural practice?
Poor management of the project
What does the multiplier in the billing rate formula represent?
The profit margin of the practice
How can the number of billable hours in a year be determined?
Multiply regular daily hours by 365 days
What is the utilization factor?
The percentage of billable hours as compared to the total hours of work in a year
According to the text, when is the best time to negotiate for a line of credit with a bank?
When funds for the operation of the practice are not required
According to the text, what is the prime rate?
The fluctuating rate that banks charge their best customers
According to the text, what information should the architect provide to the bank when borrowing funds?
Both complete records of past performance and detailed budgets and long-range financial plans
According to the text, what should the architect do when determining fees for services?
All of the above
Which of the following is NOT a reason why a profit is required in a practice?
To pay out retiring or dismissed employees
According to the text, how should the distribution of bonuses to staff be determined?
Based on both the practice's established policy and factors determined in a performance review
When the practice is owned by shareholders or partners who have invested capital, how should their investment earn interest?
At the bank's prime rate of interest plus an additional percentage
According to the text, what are some factors that should be considered in a performance review?
Ability, productivity, and professional growth
What is the purpose of building a successful financial history in a practice?
To borrow funds
True or false: The purpose of building a successful financial history in a practice is to attract potential clients and investors.
False
True or false: The distribution of bonuses to staff should be solely based on their productivity.
False
True or false: The investment of shareholders or partners in the practice should earn interest at the bank's prime rate of interest.
True
True or false: Financial planning in an architectural practice should include short-term budgeting only.
False
True or false: The prime rate is the interest rate at which banks lend to their most creditworthy customers.
True
Quiz: Evaluating Accounting Firm Proposals and Building Relationships with Bankers
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