Podcast
Questions and Answers
According to the information provided, what is the primary determinant of the ultimate health of the architecture industry?
According to the information provided, what is the primary determinant of the ultimate health of the architecture industry?
- The growth of the construction industry (correct)
- The financial condition of architecture firms
- The staff employed by architecture firms
- The design activity cycles
What has been the average yearly addition of nonresidential building square feet in the U.S. since 1980?
What has been the average yearly addition of nonresidential building square feet in the U.S. since 1980?
- Less than 1 billion square feet
- 2.6 billion square feet
- 1.3 billion square feet (correct)
- 1.3 million square feet
What were the construction levels in 2010 and 2011 in comparison to the average yearly addition of nonresidential building square feet since 1980?
What were the construction levels in 2010 and 2011 in comparison to the average yearly addition of nonresidential building square feet since 1980?
- About half the average (correct)
- More than double the average
- Less than one-third of the average
- Exactly equal to the average
What does the text suggest about the prospects for strong growth in the U.S. construction industry?
What does the text suggest about the prospects for strong growth in the U.S. construction industry?
What is the main focus of financial management in design firms?
What is the main focus of financial management in design firms?
Which of the following is considered crucial for managing a design firm financially?
Which of the following is considered crucial for managing a design firm financially?
When should the development of annual budgets and profit plans ideally begin?
When should the development of annual budgets and profit plans ideally begin?
What distinguishes accrual-basis accounting reports from financial management reports?
What distinguishes accrual-basis accounting reports from financial management reports?
Which of the following is a key term in financial management reports?
Which of the following is a key term in financial management reports?
What is the main purpose of financial management reports?
What is the main purpose of financial management reports?
What is the purpose of the Mattox Format?
What is the purpose of the Mattox Format?
Which components are included in the Mattox Format's profit-loss statement?
Which components are included in the Mattox Format's profit-loss statement?
What are some of the key financial performance indicators provided by the Mattox Format?
What are some of the key financial performance indicators provided by the Mattox Format?
Why should professional design firms establish specific financial performance goals?
Why should professional design firms establish specific financial performance goals?
How can a realistic net billing and revenue projection goal be established within the profit plan?
How can a realistic net billing and revenue projection goal be established within the profit plan?
What does a firm's total revenue in the Mattox Format include?
What does a firm's total revenue in the Mattox Format include?
What type of businesses typically use cash-basis profit-loss reports?
What type of businesses typically use cash-basis profit-loss reports?
What does a cash-basis report not reflect?
What does a cash-basis report not reflect?
What do accrual-basis reports consider?
What do accrual-basis reports consider?
What does the accrual-basis profit-loss statement establish?
What does the accrual-basis profit-loss statement establish?
Why are both cash-basis and accrual-basis reports important for financial management?
Why are both cash-basis and accrual-basis reports important for financial management?
What does the modified accrual-basis report record?
What does the modified accrual-basis report record?
What is important to maintain to ensure timely net profit distributions?
What is important to maintain to ensure timely net profit distributions?
What do conventional accounting formats not facilitate easy calculation of?
What do conventional accounting formats not facilitate easy calculation of?
'Who' are responsible for reviewing and monitoring financial data?
'Who' are responsible for reviewing and monitoring financial data?
What does the cash-basis report do for tax liability calculations?
What does the cash-basis report do for tax liability calculations?
Study Notes
- The text discusses the differences between cash-basis and accrual-basis profit-loss reports.
- Cash-basis reports are used by small businesses without employees and indicate only the income received and expenses paid within a specific accounting period.
- Cash-basis reports do not reflect the timing correlation between income and expenses.
- Accrual-basis reports, on the other hand, do not consider the actual receipt or payment of money.
- Accrual-basis reports reflect the invoices sent to clients for monthly revenue earnings based on hours worked and expenses incurred.
- The accrual-basis profit-loss statement establishes the net profit for a firm and the calculation of seven key financial performance indicators.
- Both cash-basis and accrual-basis reports are important for financial management.
- The cash-basis report indicates cash flow management effectiveness and tax liability, while the accrual-basis report indicates net profit.
- The modified accrual-basis report records only the revenue from invoiced fees and expenses.
- It is important to maintain a healthy cash-on-hand balance to ensure timely net profit distributions.
- Conventional accounting formats do not facilitate easy calculation of financial performance indicators, and the Mattox format is an alternative for easy understanding of financial performance indicators.
- Firm leaders are responsible for reviewing and monitoring financial data, and both accounting and financial reports are needed for sound business decisions.
- The cash-basis report and modified accrual-basis report are different and should not be compared directly.
- The cash-basis report is used for tax liability calculations, while the modified accrual-basis report provides an accurate snapshot of a given accounting period.
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Description
Test your knowledge of cash-basis and accrual-basis reports and their applications in financial planning. Understand the differences between the two and when each might be used in a firm.
