Accounting Terminology Quiz
74 Questions
1 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the purpose of an Aging Report?

  • To list out all assets and liabilities
  • To calculate the Average Collection Period
  • To record professional fees and disbursements
  • To keep track of invoices due and past due (correct)
  • How is the Average Collection Period calculated?

  • Accounts receivable divided by gross revenue x 365 (correct)
  • Total assets divided by total liabilities
  • Cash balance divided by accounts payable
  • Total expenses minus total revenue
  • What does Bad Debt represent?

  • The amount of accounts receivable that will not be collected from clients (correct)
  • The total assets of the practice
  • Income generated from professional fees
  • The cash position of the practice
  • Which financial statement provides a snapshot of the practice's financial position at a specific point in time?

    <p>Balance Sheet</p> Signup and view all the answers

    What does Accounts Payable represent?

    <p>Amount payable to consultants and suppliers for expenses</p> Signup and view all the answers

    What does the Cash Book primarily track?

    <p>Day-to-day cash position using accrual accounting method</p> Signup and view all the answers

    What is the primary purpose of time reports or time sheets?

    <p>To provide summaries of time spent on each task or service</p> Signup and view all the answers

    How should the type of service and phase of the project be identified in time reports?

    <p>Accurately identified</p> Signup and view all the answers

    If a fee for schematic design is budgeted at $12,000 and the hourly wage is $40, how many hours should be budgeted?

    <p>96 hours</p> Signup and view all the answers

    If an individual has a utilization rate of 90% and works 37.5 hours per week, how many billable hours should be budgeted per week?

    <p>33.75 hours</p> Signup and view all the answers

    According to the passage, what is the recommended practice when reviewing time sheets?

    <p>Review them in conjunction with the progress of the work</p> Signup and view all the answers

    What does the accrual system in accounting record?

    <p>All income and expenses as they occur</p> Signup and view all the answers

    Which accounting method are architecture businesses required to follow for tax returns?

    <p>Accrual basis</p> Signup and view all the answers

    What is the primary focus of the income statement in financial reporting?

    <p>Profitability and growth</p> Signup and view all the answers

    What is the formula for calculating profit or loss on an income statement?

    <p>Income - Expenses</p> Signup and view all the answers

    What does the balance sheet provide information about?

    <p>Financial position at a given period</p> Signup and view all the answers

    Why is cashflow vital for an architectural practice?

    <p>To stay in business</p> Signup and view all the answers

    What type of financial reports are prepared using the accrual system?

    <p>Income Statement and Balance Sheet</p> Signup and view all the answers

    What does the basic formula of the balance sheet represent?

    <p>$$ Assets = Liabilities $$</p> Signup and view all the answers

    What is another name for the income statement in financial reporting?

    <p>(Revenues - Expenditures)</p> Signup and view all the answers

    Why is it important for architects running a practice to understand their financial statements?

    <p>To monitor the business' financial health</p> Signup and view all the answers

    What is the purpose of requesting proposals from other accounting firms?

    <p>To compare services and value</p> Signup and view all the answers

    When can architects hire non-CPAs or bookkeepers instead of CPAs?

    <p>Depending on the size of the firm</p> Signup and view all the answers

    What is the purpose of establishing a capital reserve for an architect's practice?

    <p>To prepare for long-term financial stability</p> Signup and view all the answers

    What is the advantage of negotiating a line of credit with a bank instead of short-term loans?

    <p>Lower interest rates</p> Signup and view all the answers

    What does the bank generally require if the amount requested for borrowing funds is high?

    <p>Higher percentage rate of interest over 'prime'</p> Signup and view all the answers

    Why should architects provide complete records of past performance, budgets, and financial plans when borrowing funds?

    <p>To assist the banker in deciding on a line of credit</p> Signup and view all the answers

    What types of information can assist the architect in preparing accurate budgets and controlling expenses?

    <p>Complete records of past performance</p> Signup and view all the answers

    "All projects should generate a profit" - What is the only possible exception to this principle?

    <p>&quot;Long-range or short-term strategies&quot;</p> Signup and view all the answers

    When is the best time to negotiate for a line of credit with a bank?

    <p>When financing is not required</p> Signup and view all the answers

    What determines the interest rate quoted by the bank for financing architectural practices?

    <p>The bank's perception of risk and 'prime rate'</p> Signup and view all the answers

    What does the current ratio measure?

    <p>Liquidity risk of the business</p> Signup and view all the answers

    What does the debt to equity ratio indicate if debt is higher than equity?

    <p>The business is overburdened by debt</p> Signup and view all the answers

    What does depreciation/amortization account for?

    <p>Loss in value of an asset as it ages</p> Signup and view all the answers

    What is included in direct personnel expense?

    <p>Employee benefits and salary</p> Signup and view all the answers

    What does the labour multiplier represent?

    <p>Return on investment in direct labour costs</p> Signup and view all the answers

    What is considered when calculating the overhead rate?

    <p>Total indirect labour costs</p> Signup and view all the answers

    Why is it important for the fiscal year-end to correspond to the end of the calendar year?

    <p>To optimize tax payments based on a calendar year</p> Signup and view all the answers

    What is not part of current liabilities?

    <p>Accounts receivable</p> Signup and view all the answers

    What does the debt to equity ratio formula calculate?

    <p>Liabilities divided by shareholders' equity</p> Signup and view all the answers

    What is the purpose of estimating the fees for schematic design according to the text?

    <p>To check if the proposed fee is sufficient for the contracted services and profit realization</p> Signup and view all the answers

    How can billing rates be established effectively according to the text?

    <p>By converting annual salaries to hourly direct personnel expenses</p> Signup and view all the answers

    What factor is included in the multiplier used to determine billing rates?

    <p>Overhead plus profit</p> Signup and view all the answers

    Why should utilization factors be monitored regularly according to the text?

    <p>Due to a direct correlation with high revenue potential</p> Signup and view all the answers

    What does the utilization factor measure according to the text?

    <p>The total billable hours possible compared to actual billable hours</p> Signup and view all the answers

    What is NOT included in billing rates according to the text?

    <p>$40 hourly wage for an employee</p> Signup and view all the answers

    What is the formula for calculating profit margin?

    <p>Net profit divided by net revenue x 100</p> Signup and view all the answers

    How are project costs monitored and controlled efficiently according to the text?

    <p>$100 tip for rolling up work packages</p> Signup and view all the answers

    What should the investment of shareholders or partners in an architectural practice earn?

    <p>The bank's prime rate of interest plus an additional reasonable percentage</p> Signup and view all the answers

    What is the starting point for financial planning in an architectural practice?

    <p>The revenue forecast</p> Signup and view all the answers

    Which financial report documents all income, expenses, and the resulting profit or loss?

    <p>Statement of Income and Expenses</p> Signup and view all the answers

    What records are used to calculate billing rates for staff members?

    <p>Staff Utilization Records</p> Signup and view all the answers

    What should a financial plan identify for any new direction in an architectural practice?

    <p>Income and expenses projected for the new direction</p> Signup and view all the answers

    What is the typical time period covered by short-term financial planning or budgeting?

    <p>12 months</p> Signup and view all the answers

    What is necessary to attract talent, secure bank loans, and grow business operations?

    <p>Continuous generation of profits</p> Signup and view all the answers

    What should budgets record in addition to projected income and expenses?

    <p>The previous year's revenue and expenses</p> Signup and view all the answers

    What is included in Payroll Burden besides statutory benefits?

    <p>Discretionary benefits such as insurance and pension plans</p> Signup and view all the answers

    What is the purpose of setting aside a percentage of profit as a capital reserve?

    <p>To ensure financial stability</p> Signup and view all the answers

    What factors should projected income be adjusted for in an architectural practice?

    <p>The current and projected economy in the design-construction industry</p> Signup and view all the answers

    What type of accounting is performed within an architectural practice?

    <p>Internal accounting or management accounting</p> Signup and view all the answers

    What is the significance of the distribution of incentive bonuses to staff based on performance review factors?

    <p>To align rewards with performance</p> Signup and view all the answers

    What level of assurance does a review provide regarding financial statements?

    <p>A lower level of assurance compared to an audit</p> Signup and view all the answers

    What type of assurance do banks typically require when working to secure external funding?

    <p>A review</p> Signup and view all the answers

    What are records of accounting considered?

    <p>Statutory requirements</p> Signup and view all the answers

    Which financial statement provides a detailed explanation of the change in cash on the balance sheet?

    <p>Cashflow statement</p> Signup and view all the answers

    What can help a firm be financially successful according to the text?

    <p>Using project management software</p> Signup and view all the answers

    Why is it important for a company to have enough cash even if it's profitable on the income statement?

    <p>To pay for operations</p> Signup and view all the answers

    What role do finance professionals like accountants play according to the text?

    <p>Assist with financial data</p> Signup and view all the answers

    What does the cashflow forecast help in determining?

    <p>Cash required to meet expenses</p> Signup and view all the answers

    How often should a cashflow forecast be monitored according to the text?

    <p>Monthly</p> Signup and view all the answers

    What difference exists between profit and cash according to the text?

    <p>'Profit' is on the income statement, 'cash' is on the balance sheet</p> Signup and view all the answers

    Who can work with financial data according to the text?

    <p>'Finance professionals'</p> Signup and view all the answers

    What is essential for a good relationship between an architect and an accountant?

    <p>'Building trust and transparency'</p> Signup and view all the answers

    What is a CPA responsible for according to the text?

    <p>Adhering to professional standards</p> Signup and view all the answers

    More Like This

    Acquisition Accounting Terminology Quiz
    9 questions
    Accounting Terminology Quiz
    5 questions
    Accounting Terminology Quiz
    5 questions
    Accounting: Fixed Assets Terminology
    24 questions
    Use Quizgecko on...
    Browser
    Browser