Exam 1 Study Guide
1. From what sources does the federal government generate its revenue?
Individual Income Taxes, Corporate Income Taxes, Social Insurance Taxes/ Contributions, Excise
2. Know the definitions of progre
Chapter 8 vocabulary
Accelerated cost recovery system (ACRS)
can be used on property if started before 1987
A method in which the cost of tangible property is recovered (depreciated) over a prescribed period of
time. This depreciation appro
February 27, 2016
Chapter 7 Problems
1. An account receivable becomes a bad debt deduction if someone doesnt pay and it was already
included in your gross income.
2. In order to have a bad you have to use accrual accounting.
3. A bad debt d
Chapter 8 Vocabulary
1. No personal use property is not subject to cost recovery. Property listed as for personal use is
not intended for business use and does not qualify for depreciation.
2. Personal property is property that is
Chapter 6 Problems
1. The tax law states that income is any realized increase in wealth; whereas, there are several
deductions that rely on specific circumstances or situations.
2. The deduction for a traditional IRA reduces AGI, he would s
Chapter 6 Key Terms
Accounting method :
Method that businesses use
The method under which income and expenses are determined for tax purposes. Important accounting
methods include the cash basis and the accrual basis. Special methods are av
Chapter 4 Vocabulary
Accounting Income: The accountants concept of income is generally based upon the realization
principal. Financial accounting income may differ from taxable income (e.g., accelerated depreciation
might be used
1. According to the book "The primary goal of financial accounting is to provide useful information to
management, shareholders, creditors, and others properly interested; the major goal of the accountant
is to protect t
G. The gain is taxable
H. The aunt can still be filed as an exemption
A. Yes, as a dealer John will have a higher tax rate.
B. Yes, Theresa will now have to pay the self-employment tax also.
C. Maybe, Paul may file itemized deductions instead of the standard deductions
3. Yes I agree wi
Chapter 7 Vocabulary
Exp- someone owes you money
A deduction is permitted if a business account receivable subsequently becomes partially or completely
worthless, providing the income arising from the debt previously was included