Financial Fluency: Small Business Accounting Quiz

Variable costs are costs that are proportionate with the changes in an activity level.

Rent is considered an expense account because it represents the cost incurred by a business for utilizing a property or space. It is a regular expenditure that a company needs to pay in order to operate its business activities. Rent is categorized as an expense on the income statement and is deducted from the revenue to calculate the net income or profit of the business. Unlike common stock, retained earnings, and dividends, which are not expenses, rent directly impacts the profitability of a company and is therefore classified as an expense account.

This is a liabilities account.

Customers are external users of the accounting practices of an organization or business.

In the basic accounting equation, Assets= Liabilities + Stockholders’ Equity

The types of costs are fixed, mixed, and variable.
Percentage is not a type of cost.

Selling expenses are included in the list of period cost.

In managerial accounting, managers determine the
frequency and types of reports to be created.

Income statements are used to indicate how successfully the business performed during a specific point in time.

The primary management functions are planning, directing, and controlling.

While this may be a solution at some point for Joe, he should first recognize the situation, identify the elements, and identify the alternatives when analyzing the ethical dilemma.

In order to find gross profit, we take the sales revenue and subtract cost of goods sold ($400,000 - $310,000)

While this may be an important part of marketing for a business, it is not considered one of the 3 main business activities.

These are the three components of manufacturing costs.

A characteristic of a corporation is its separate legal existence. This means that a corporation is considered a legal entity separate from its owners. It has its own rights and obligations, can enter into contracts, and can be held liable for its actions. This characteristic provides the advantage of limited liability, as the owners' personal assets are generally protected from the corporation's debts and liabilities. Additionally, a corporation can continue to exist even if the ownership or management changes, ensuring its continuity and stability.

Journal entries show individual transactions-not the profitability of the company as an overall unit.

Creating incentives for managers to be rewarded is not a benefit or budgeting and can potentially lead to unethical behavior.

In managerial accounting, managers want only the relevant data and reports for a specific sub-unit of a company.

This is typically the budget that is prepared first since all other budgets depends on the sales budget.

This is a ratio frequently used when measuring liquidity.

A company must have retained earnings, adequate cash, and declared dividends for the period in order to pay our dividends.

If an asset decreases, another asset must increase.

Holding onto Treasury Stock will actually reduce the number of shares outstanding, thus increasing earnings per share.