Major Field Test Business Study Set, ETS MFT
BUSINESS EXAM set 2 GRADED A 2024
Balance Sheet - Correct Ans-Attempts to describe the financial condition of the firm at a
point in time.
Includes: Assets, Liabilities, & Equity - "net assets" what remains after deducting
liabilities from assets..
Income Statement - Correct Ans-Presents the results of the operations of an entity over
a peroid of time.
Includes: Revenues, Expenses, Income, Gains & Losses
Statement of Equity or Statement of Retained Earnings (Capital) - Correct Ans-Bridges
the gap between the income statement and the balance sheet.
Arrangement depends on type of organization:
Proprietorship: Statement of Owners Equity
Partnership: Statement of Partners Equity
Corporation: Statement of Stockholders Equity
In addition, it contains: Investments by Owners and Distribution to owners
Statement of Cash Flows - Correct Ans-Provides information about a company's cash
receipts and cash payments during a specific period of time.
Includes all 10 elements of financial statements: assets, liabilities, equity, net income,
income, gains, losses, Statement of 'X' Equity, Investments by Owners, Distributions to
Owners.
Cash Basis Accounting - Correct Ans-Revenue is recognized in the accounting period in
which the associated cash is received and Expenses are recognized in the accounting
period that the cash is paid.
Accrual Basis Accounting - Correct Ans-Revenue is recognized in the accounting period
in which the revenue is earned, regardless of when the associated revenue is received.
(Recorded when the sale is made, not when it is paid for.)
Depreciation - Correct Ans-A method of allocating the cost of a tangible asset over its
useful life. Businesses depreciate long-term assets for both tax and accounting
purposes.
Straight-Line Deprecation - Correct Ans-Straight Line Depreciation - (estimated
value/useful life)
Equal amounts of depreciation expense are recorded in each period of the useful life of
the asset, if not disposed of prior to the end of estimated useful life.
,The value is divided among estimated life of item.
Double Declining Balance Depreciation - Correct Ans-Double Declining Balance
An "accelerated" depreciation method (more expense is recorded in the early periods of
useful life and less in the later periods.)
Basic Inventory Equation for Goods - Correct Ans-Beginning Inventory + Purchases =
Goods
Basic Inventory Equation for Cost of Goods Sold (COGS) - Correct Ans-Goods
Available for Sale - Ending Inventory = Cost of Goods Sold (COGS)
Basic Inventory Equation for Ending Inventory - Correct Ans-Beginning Inventory +
Purchases = Goods Available for Sale - Cost of Goods Sold (COGS) = ending inventory
Periodic Inventory Accounting - Correct Ans-No transactions are recorded in the
inventory account until the end of the accounting period. Merchandise purchases are
recorded in a purchases account.
Inventory is counted and costed at the end of each accounting period. The inventory
account beginning balance is adjusted to physical inventory amount and the difference
is added to or subtracted from periodic Cost of Goods Sold.
Perpetual Inventory Accounting - Correct Ans-Merchandise purchases are added to the
inventory account when the merchandise is received.
Cost of Goods Sold is computed and subtracted from the inventory account as sales are
recorded.
FIFO (Inventory) - Correct Ans-Inventory Oldest items inventory are sold first .(Example:
Fruit)
LIFO (Inventory) - Correct Ans-Most recent items added to inventory are sold first.
(Example: Ore from Mining)
Average Cost (Inventory) - Correct Ans-Ending inventory units are costed using an
average cost of goods available divided by the units available for sale. (Example: Rope)
Specific Identification (Inventory) - Correct Ans-Inventory items are tagged with their
cost. (Example: automobiles)
Generally Accepted Accounting Principles (GAAP) - Correct Ans-A framework of
accounting standards, rules and procedures defined by the professional accounting
industry, which has been adopted by nearly all publicly traded U.S. companies.
,Securities Act of 1935 - Correct Ans-Established the SEC Securities and Exchange
Commission with the explicit authority to establish the rules, standards, and procedures
used to account for transactions and events. Also to establish the form and content of
published financial reporting.
Management Accounting - Correct Ans-Concerned with identification, measurement,
accumulation, analysis, preparation, interpretation, and communication of financial
information used my management to plan and evaluate and control within an
organization to assure appropriate use of and accountability of resources.
Cost Accounting - Correct Ans-Concerned only with the cost of a product or service.
Product Costs - Correct Ans-Cost of the various products manufactured and sold by a
company. (Examples: Inventory Costs or Cost of Prodcution
Period Cost - Correct Ans-ll costs incurred by a company that are not considered
product costs. (Examples: Administration Expenses or Selling Expenses)
Direct Costs - Correct Ans-A cost that is easily traceable to the cost object and is a
result solely of the cost object. (Example: Lye used to make bars of soap.)
Indirect Cost - Correct Ans-A cost that supports more than one cost objects, and must
be "allocated" to those various cost objects (Example: Electricity used at a plant.)
Direct Material - Correct Ans-Cost of materials used in production. (Examples: sheet
metal, tires, fabric, etc.)
Direct Labor - Correct Ans-Cost of Labor used in production. (Example: assembly line
workers)
Manufacturing Overhead - Correct Ans-Indirect factory-related costs that are incurred
when a product is manufactured. (Examples: facility costs, indirect labor, machine set
up costs, quality control, etc.)
Variable Costs - Correct Ans-Expenses that vary directly with changes in activity or
changes in volume.
Fixed Cost - Correct Ans-Expenses that do not change as a function of the activity of a
business, within the relevant period. (Examples: Rent, Utilities, etc.)
Adam Smith - Correct Ans-Father of Economics
Responsible for Division of Labor 1776:
Tasks are subdivided into individual jobs
Employees perform only the tasks relevant to their specialized function
, Jobs tend to be small, but they can be performed efficiently
Proposes that production can be increased by dividing labor on to similar tasks
Frederick Winslow Taylor - Correct Ans-Scientific Management 1911: Developed
standard method for performing each job
Selected workers with appropriate abilities for each job.
Trained workers in standard method.
Provided wage incentives to workers for increased output.
Did not acknowledge variance among workers.
Did not appreciate social context of work and higher needs of workers.
Max Weber - Correct Ans-Bureaucracy:
Focused on the organization as a whole
Organizations needed division of labor with clear
definitions of authority and responsibility.
Positions organized in a hierarchy of authority.
Henri Favol - Correct Ans-Developed the 14 General Principles of Management
14 General Principles of Management - Correct Ans-Division of Labor, Authority,
Discipline, Unity of Command, Unity of Direction, Subordination of Individual Interests to
the General Interest, Remuneration, Centralization, Scalar Chain, Order, Equity,
Stability of Tenure of Personnel, Initiative, and Esprit de Corps
Division of Labor or Work (Management) - Correct Ans-When employees are
specialized, output can increase because they become increasingly skilled and efficient.
Authority (Management) - Correct Ans-Managers must have the authority to give orders,
but they must also keep in mind that with authority comes responsibility.
Discipline (Management) - Correct Ans-Discipline must be upheld in organizations, but
methods for doing so can vary.
Unity of Command (Management) - Correct Ans-Employees should have only one direct
supervisor.
BUSINESS EXAM set 2 GRADED A 2024
Balance Sheet - Correct Ans-Attempts to describe the financial condition of the firm at a
point in time.
Includes: Assets, Liabilities, & Equity - "net assets" what remains after deducting
liabilities from assets..
Income Statement - Correct Ans-Presents the results of the operations of an entity over
a peroid of time.
Includes: Revenues, Expenses, Income, Gains & Losses
Statement of Equity or Statement of Retained Earnings (Capital) - Correct Ans-Bridges
the gap between the income statement and the balance sheet.
Arrangement depends on type of organization:
Proprietorship: Statement of Owners Equity
Partnership: Statement of Partners Equity
Corporation: Statement of Stockholders Equity
In addition, it contains: Investments by Owners and Distribution to owners
Statement of Cash Flows - Correct Ans-Provides information about a company's cash
receipts and cash payments during a specific period of time.
Includes all 10 elements of financial statements: assets, liabilities, equity, net income,
income, gains, losses, Statement of 'X' Equity, Investments by Owners, Distributions to
Owners.
Cash Basis Accounting - Correct Ans-Revenue is recognized in the accounting period in
which the associated cash is received and Expenses are recognized in the accounting
period that the cash is paid.
Accrual Basis Accounting - Correct Ans-Revenue is recognized in the accounting period
in which the revenue is earned, regardless of when the associated revenue is received.
(Recorded when the sale is made, not when it is paid for.)
Depreciation - Correct Ans-A method of allocating the cost of a tangible asset over its
useful life. Businesses depreciate long-term assets for both tax and accounting
purposes.
Straight-Line Deprecation - Correct Ans-Straight Line Depreciation - (estimated
value/useful life)
Equal amounts of depreciation expense are recorded in each period of the useful life of
the asset, if not disposed of prior to the end of estimated useful life.
,The value is divided among estimated life of item.
Double Declining Balance Depreciation - Correct Ans-Double Declining Balance
An "accelerated" depreciation method (more expense is recorded in the early periods of
useful life and less in the later periods.)
Basic Inventory Equation for Goods - Correct Ans-Beginning Inventory + Purchases =
Goods
Basic Inventory Equation for Cost of Goods Sold (COGS) - Correct Ans-Goods
Available for Sale - Ending Inventory = Cost of Goods Sold (COGS)
Basic Inventory Equation for Ending Inventory - Correct Ans-Beginning Inventory +
Purchases = Goods Available for Sale - Cost of Goods Sold (COGS) = ending inventory
Periodic Inventory Accounting - Correct Ans-No transactions are recorded in the
inventory account until the end of the accounting period. Merchandise purchases are
recorded in a purchases account.
Inventory is counted and costed at the end of each accounting period. The inventory
account beginning balance is adjusted to physical inventory amount and the difference
is added to or subtracted from periodic Cost of Goods Sold.
Perpetual Inventory Accounting - Correct Ans-Merchandise purchases are added to the
inventory account when the merchandise is received.
Cost of Goods Sold is computed and subtracted from the inventory account as sales are
recorded.
FIFO (Inventory) - Correct Ans-Inventory Oldest items inventory are sold first .(Example:
Fruit)
LIFO (Inventory) - Correct Ans-Most recent items added to inventory are sold first.
(Example: Ore from Mining)
Average Cost (Inventory) - Correct Ans-Ending inventory units are costed using an
average cost of goods available divided by the units available for sale. (Example: Rope)
Specific Identification (Inventory) - Correct Ans-Inventory items are tagged with their
cost. (Example: automobiles)
Generally Accepted Accounting Principles (GAAP) - Correct Ans-A framework of
accounting standards, rules and procedures defined by the professional accounting
industry, which has been adopted by nearly all publicly traded U.S. companies.
,Securities Act of 1935 - Correct Ans-Established the SEC Securities and Exchange
Commission with the explicit authority to establish the rules, standards, and procedures
used to account for transactions and events. Also to establish the form and content of
published financial reporting.
Management Accounting - Correct Ans-Concerned with identification, measurement,
accumulation, analysis, preparation, interpretation, and communication of financial
information used my management to plan and evaluate and control within an
organization to assure appropriate use of and accountability of resources.
Cost Accounting - Correct Ans-Concerned only with the cost of a product or service.
Product Costs - Correct Ans-Cost of the various products manufactured and sold by a
company. (Examples: Inventory Costs or Cost of Prodcution
Period Cost - Correct Ans-ll costs incurred by a company that are not considered
product costs. (Examples: Administration Expenses or Selling Expenses)
Direct Costs - Correct Ans-A cost that is easily traceable to the cost object and is a
result solely of the cost object. (Example: Lye used to make bars of soap.)
Indirect Cost - Correct Ans-A cost that supports more than one cost objects, and must
be "allocated" to those various cost objects (Example: Electricity used at a plant.)
Direct Material - Correct Ans-Cost of materials used in production. (Examples: sheet
metal, tires, fabric, etc.)
Direct Labor - Correct Ans-Cost of Labor used in production. (Example: assembly line
workers)
Manufacturing Overhead - Correct Ans-Indirect factory-related costs that are incurred
when a product is manufactured. (Examples: facility costs, indirect labor, machine set
up costs, quality control, etc.)
Variable Costs - Correct Ans-Expenses that vary directly with changes in activity or
changes in volume.
Fixed Cost - Correct Ans-Expenses that do not change as a function of the activity of a
business, within the relevant period. (Examples: Rent, Utilities, etc.)
Adam Smith - Correct Ans-Father of Economics
Responsible for Division of Labor 1776:
Tasks are subdivided into individual jobs
Employees perform only the tasks relevant to their specialized function
, Jobs tend to be small, but they can be performed efficiently
Proposes that production can be increased by dividing labor on to similar tasks
Frederick Winslow Taylor - Correct Ans-Scientific Management 1911: Developed
standard method for performing each job
Selected workers with appropriate abilities for each job.
Trained workers in standard method.
Provided wage incentives to workers for increased output.
Did not acknowledge variance among workers.
Did not appreciate social context of work and higher needs of workers.
Max Weber - Correct Ans-Bureaucracy:
Focused on the organization as a whole
Organizations needed division of labor with clear
definitions of authority and responsibility.
Positions organized in a hierarchy of authority.
Henri Favol - Correct Ans-Developed the 14 General Principles of Management
14 General Principles of Management - Correct Ans-Division of Labor, Authority,
Discipline, Unity of Command, Unity of Direction, Subordination of Individual Interests to
the General Interest, Remuneration, Centralization, Scalar Chain, Order, Equity,
Stability of Tenure of Personnel, Initiative, and Esprit de Corps
Division of Labor or Work (Management) - Correct Ans-When employees are
specialized, output can increase because they become increasingly skilled and efficient.
Authority (Management) - Correct Ans-Managers must have the authority to give orders,
but they must also keep in mind that with authority comes responsibility.
Discipline (Management) - Correct Ans-Discipline must be upheld in organizations, but
methods for doing so can vary.
Unity of Command (Management) - Correct Ans-Employees should have only one direct
supervisor.
