AHLEI Final Exam Study Guide

AHLEI Final Exam Study Guide Why is it important that you, a hospitality student or professional, study accounting? - ✔✔As a user of financial information, you need to know how the information is processed and how rep ...

AHLEI Final Exam Study Guide Why is it important that you, a hospitality student or professional, study accounting? - ✔✔As a user of financial information, you need to know how the information is processed and how reports are prepared. The fundamental purpose of accounting is to: - ✔✔provide accurate, useful, and timely financial information. The fundamental accounting equation is: - ✔✔assets = liabilities + equity In the double-entry system of accounting: - ✔✔equal dollar amounts of debits and credits must be entered for each business transaction. The Hospitality Financial & Technology Professionals serves its membership by: - ✔✔providing training sessions on hospitality accounting and technology and conducting professional development seminars for clubs, gaming operations, and other areas of special interest. In a corporation business form: - ✔✔profits are retained in the corporation, with shareholders receiving dividends at the discretion of the board of directors. How is a business's income tax computed? - ✔✔taxable income multiplied by an applicable tax rate Which of the following best describes par value of a corporation's stock? - ✔✔It is an established value for a company's stock, generally very low, below which the stock cannot be originally issued. Which of the following statements regarding the partnership form of business is true? - ✔✔It may have any number of limited partners. Forming a corporation is a legal procedure performed by: - ✔✔filing articles of incorporation with the secretary of corporation's office in the corporation's home state. The financial document that provides information about the results of a company's operations for a period of time is the: - ✔✔statement of income. The purpose of a balance sheet is to: - ✔✔show the financial position of a company on a given date. Which of the following are the basic financial statements prepared by hospitality businesses? - ✔✔statement of income, equity statement, balance sheet, statement of cash flows. Managers, stockholders, investors, creditors, and other interested readers of a hospitality business's financial statements use the statements to get information about: - ✔✔what the hospitality operation has accomplished financially, where cash came from and where it was spent during the most recent accounting period, and the operation's ability to pay its bills. The statement of retained earnings for a corporation shows: - ✔✔the amount of earnings retained by the corporation. An unsecured bond backed only by the good faith of the issuer is called a: - ✔✔debenture bond. The account Prepaid Insurance is classified on the balance sheet as a: - ✔✔current asset. Assets in the Property and Equipment category are sometimes referred to as: - ✔✔fixed assets. Current assets consist of: - ✔✔those that are convertible to cash within 12 months of the balance sheet date, those that are available without restriction for use in payment of current liabilities, and cash. Under which of the following is sales tax collected from guests recorded? - ✔✔current liability. Which of the following is an example of a fixed expense? - ✔✔property insurance. Which of the following is included in sales? - ✔✔credit card sales. A hospitality operation uses a perpetual inventory system. How would food issues from the storeroom to the kitchen be recorded in bookkeeping accounts? - ✔✔as a decrease in the inventory account and an increase in the cost of food sales account. Sales tax collected as the result of a sale of merchandise is recorded as: - ✔✔a liability. For accounting purposes, a sale is recognized and recorded in the revenue classification when: - ✔✔services are rendered or when goods are delivered. How does the purchase of advertising on open account affect the accounting record? - ✔✔it increases both an expense account and a liability account. In double-entry accounting: - ✔✔every business transaction affects two or more bookkeeping accounts. The bookkeeping accounts kept by a business are referred to collectively as the: - ✔✔general ledger. In a two-column T-account format: - ✔✔debits are recorded on the left side and credits are recorded on the right side. The monetary amount that results from summarizing a bookkeeping account is referred to as the account: - ✔✔balance. Which of the following is the most significant potential disadvantage of a computerized accounting system? - ✔✔electric-power failure or computer breakdown. From left to right, the three columns in a three-column account format are: - ✔✔debit, credit, and balance. The two software modules of a computerized general ledger that are used mainly to set up the system are the ____________ module and the ____________ module. - ✔✔chart of accounts; starting balances. When is it necessary to post a journal entry to a subsidiary account? - ✔✔whenever a transaction affects a controlling account in the general ledge. The significant feature of an online accounting system is its: - ✔✔ability to record business transactions as they occur. A working trial balance from the software's Trial Balance Module is printed so the accountant can: - ✔✔manually determine adjustments. With regard to cash basis accounting, which of the following is true? - ✔✔it is not in compliance with generally accepted accounting principles. Which accounts are used in computing net income or loss? - ✔✔revenue and expense. Under the accrual basis of accounting: - ✔✔adjustments for such items as invoices not yet received and potential bad debts must be made before financial statements are prepared. In a corporate business form, a Dividends Declared account is not necessary because the declaration of dividends by the board of directors can be treated as a direct reduction of: - ✔✔retained earnings. Sales mix, the relationship of an element of sales to the total, is computed by dividing: - ✔✔item sales by total sales. Which of the following describes a difference between a perpetual inventory system and a periodic inventory system? - ✔✔A perpetual inventory system involves extensive record keeping and other clerical effort. Income statements for a full-service restaurant and a fast-food restaurant are similar, with the exception that: - ✔✔full-service restaurants may have a beverage entry under Sales and fast-food restaurants do not, fast-food restaurants have a separate entry for paper goods under Cost of Sales and full-service restaurants do not, and full-service restaurants may have a beverage entry under Cost of Sales and fast-food restaurants do not. In restaurants that serve alcoholic beverages: - ✔✔food sales and beverage sales are recorded in separate bookkeeping accounts. During a given month, food used by a restaurant totaled $9,000. The cost of free meals to employees was $200. What was the cost of food sales for the month? - ✔✔$8,800 What is the formula used to determine average food check? - ✔✔food revenue ÷ number of covers A hotel offers a package plan for $1,200 that includes room, food, and golf for three days. If the market values are: room, $800; food, $400; and golf $200, what are the sales allocations for each of the three departments (rounded to the nearest dollar)? - ✔✔room, $686; food, $343; golf, $171 In casino operations, gaming revenue is defined as the: - ✔✔difference between gaming wins and losses. Occupation costs are a(n): - ✔✔fixed expense. What differentiates operated departments from other hospitality departments? - ✔✔they generate revenue. Which of the following is a tangible asset? - ✔✔guest room furniture. Amortization is the process that allocates the cost of assets: - ✔✔that have no physical structure, but will last for more than one year. The declining balance depreciation method provides the ___________ depreciation amount in the __________ of an asset's life. - ✔✔highest; early years. Assets that provide service of one year or longer are called: - ✔✔fixed assets. What is the formula for calculating depreciation under the straight-line method? - ✔✔cost - salvage ÷ useful life = annual depreciation expense The results of a _________ analysis are often used to construct pie charts or other graphic representations. - ✔✔common-size. Which of the following options identifies the contents of the financial statement package? - ✔✔income statement, balance sheet, and statement of cash flows. Information on such topics as accounting policies, depreciation methods, and pending lawsuits is provided in: - ✔✔notes to the financial statements. Which of the following statements regarding the investing activities section of the statement of cash flows is true? - ✔✔its purpose is to report on cash used to purchase investments or longlived assets, it does not involve gains or losses on sale of assets or the purchase cost of assets, and it reports on cash received from the sale of investments or long-lived assets. An effective tool for analyzing financial statements is ratio analysis, in which: - ✔✔a relationship between two numbers is calculated by dividing one by the other. The Securities and Exchange Commission was created because of the: - ✔✔stock market crash of 1929. The Sarbanes-Oxley Act of 2002 was passed by Congress to protect: - ✔✔investors from fraudulent accounting activities by publicly held corporations. The annual business and financial report that public companies must file with the Securities and Exchange Commission is called the __________ report. - ✔✔10-K The government agency that plays the major role in the governmental regulation of the securities markets is the:Securities and Exchange Commission. - ✔✔Securities and Exchange Commission. From a company's standpoint, the most desirable opinion of its annual report it can receive from an auditor or auditing firm is a(n): - ✔✔unqualified opinion. Which of the following statements about credit cards and their use in the hospitality industry is true? - ✔✔in most hospitality businesses, credit cards are the most widely used form of payment, and a business must have a merchant account in order to accept credit cards. The process that a business uses to make sure a customer's credit card account is in good status is called: - ✔✔authorization. Which of the following components of a point-of-sale system processes credit cards? - ✔✔card swipe terminal. The component of a point-of-sale system that houses money, checks, credit card receipts, and other funds is the: - ✔✔cash register/cash drawer. What is a payment gateway? - ✔✔a payment gateway links the online buyer's and online seller's banks/financial institutions. Who should be involved in putting together the budget for a business? - ✔✔everyone at the business who has financial and planning responsibilities. Depreciation, amortization, rent, interest, property taxes, and property insurance are all examples of __________ expenses. - ✔✔fixed. Budgeting is important to managers of hospitality businesses because it: - ✔✔can reveal potential problems. helps managers control expenditures. The only expenses that act in a parallel pattern with volume are __________ expenses. - ✔✔variable. The process of organizing and analyzing financial and other information to arrive at a future sales volume estimate expressed in units or dollars is called: - ✔✔sales forecasting. The design of an effective and all-inclusive internal control system for cash receipts: - ✔✔requires the skills of an experienced accountant. A cash overage occurs on a cashier's daily report when: - ✔✔the control total is smaller than the total receipts and paid-outs. Among the objectives of an internal control system are: - ✔✔to protect assets against waste, to promote operational efficiency, to ensure compliance with company policies A bank reconciliation is: - ✔✔an internal control document that reconciles the cash balance on the bank statements with the cash balance per the accounting records. The accounting principle of separation of duties is satisfied in the bank reconciliation process when: - ✔✔individuals who do not have a role in cash receipt and disbursement prepare the bank reconciliation. Why do vendors sometimes offer cash discounts to their customers? - ✔✔to encourage prompt payment of invoices With regard to interest calculation, what is an ordinary year? - ✔✔an accounting convention that assumes a year is 360 days Which of the following is a cash flow stream for a finite number of periods where all the cash flows are equal in amount? - ✔✔an annuity What is the formula used to calculate simple interest if the time period is stated in months? - ✔✔I = PRT ÷ 12 If an invoice states payment terms of "2/10,n30," what does it mean? - ✔✔The buyer will receive a 2 percent discount if he or she pays the invoice within 10 days of the invoice date; otherwise, he or she must pay the full amount within 30 days of the invoice date.