SBA Loans and Construction Accounting Review

A collection of flashcards covering key concepts related to SBA loans and various aspects of construction accounting.

SBA Loan Eligibility

Who is eligible to apply for a Small Business Administration loan?

General Ledger

A bookkeeping record that compiles all financial transactions for a business.

Cost of Goods Sold

The total cost of producing goods that have been sold by the company during a specific period.

Accrual System of Bookkeeping

A method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

Percentage of Completion Method

An accounting method for recognizing revenue based on the percentage of a project that has been completed.

Current Ratio

A liquidity ratio that measures a company's ability to cover its short-term obligations with its short-term assets.

Net Profit Margin

A measure of profitability calculated as net income divided by revenue, expressed as a percentage.

Book Value

The value of an asset according to its balance sheet account balance, as opposed to its market value.

Depreciation

The systematic reduction in the recorded cost of a fixed asset over its useful life.

Gain/Loss on Sale

The difference between the sale price of an asset and its book value at the time of sale.

Cash Sales

Sales for which payment is made immediately at the time of the transaction.

Fixed Overhead

The ongoing expenses that do not fluctuate with production levels, such as rent and salaries.

Change Order

A written order signed by the owner and contractor, authorizing a change in the work or the time of completion.

Federal Unemployment Tax Act (FUTA)

A federal law that establishes a state-administered unemployment insurance program.

Contractor's Manual

A guide that provides standards and protocols for contractors regarding various aspects of construction management.

Workers Compensation Benefit

Compensation provided to employees who are injured at work, covering medical and rehabilitation costs.

SBA Loan Eligibility

Who is eligible to apply for a Small Business Administration loan?

General Ledger

A bookkeeping record that compiles all financial transactions for a business.

Cost of Goods Sold

The total cost of producing goods that have been sold by the company during a specific period.

Accrual System of Bookkeeping

A method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

Percentage of Completion Method

An accounting method for recognizing revenue based on the percentage of a project that has been completed.

Current Ratio

A liquidity ratio that measures a company's ability to cover its short-term obligations with its short-term assets, calculated as: \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}

Net Profit Margin

A measure of profitability calculated as net income divided by revenue, expressed as a percentage: \text{Net Profit Margin} = (\frac{\text{Net Income}}{\text{Revenue}}) \times 100\%

Book Value

The value of an asset according to its balance sheet account balance, as opposed to its market value.

Depreciation

The systematic reduction in the recorded cost of a fixed asset over its useful life.

Gain/Loss on Sale

The difference between the sale price of an asset and its book value at the time of sale.

Cash Sales

Sales for which payment is made immediately at the time of the transaction.

Fixed Overhead

The ongoing expenses that do not fluctuate with production levels, such as rent and salaries.

Change Order

A written order signed by the owner and contractor, authorizing a change in the work or the time of completion.

Federal Unemployment Tax Act (FUTA)

A federal law that establishes a state-administered unemployment insurance program.

Contractor's Manual

A guide that provides standards and protocols for contractors regarding various aspects of construction management.

Workers Compensation Benefit

Compensation provided to employees who are injured at work, covering medical and rehabilitation costs.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

Income Statement

A financial statement that summarizes revenues, costs, and expenses incurred during a specific period.

Retainage

A portion of the agreed-upon contract price deliberately withheld until the work is substantially complete.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for.

Accounts Payable

Money owed by a business to its suppliers for credit purchases.

Working Capital

The difference between current assets and current liabilities, calculated as: \text{Working Capital} = \text{Current Assets} - \text{Current Liabilities}

Performance Bond

A surety bond issued to guarantee satisfactory completion of a project by a contractor.

SBA Loan Eligibility

Who is eligible to apply for a Small Business Administration loan?

General Ledger

A bookkeeping record that compiles all financial transactions for a business.

Cost of Goods Sold

The total cost of producing goods that have been sold by the company during a specific period.

Accrual System of Bookkeeping

A method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

Percentage of Completion Method

An accounting method for recognizing revenue based on the percentage of a project that has been completed.

Current Ratio

A liquidity ratio that measures a company's ability to cover its short-term obligations with its short-term assets, calculated as: \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}

Net Profit Margin

A measure of profitability calculated as net income divided by revenue, expressed as a percentage: \text{Net Profit Margin} = (\frac{\text{Net Income}}{\text{Revenue}}) \times 100\%

Book Value

The value of an asset according to its balance sheet account balance, as opposed to its market value.

Depreciation

The systematic reduction in the recorded cost of a fixed asset over its useful life.

Gain/Loss on Sale

The difference between the sale price of an asset and its book value at the time of sale.

Cash Sales

Sales for which payment is made immediately at the time of the transaction.

Fixed Overhead

The ongoing expenses that do not fluctuate with production levels, such as rent and salaries.

Change Order

A written order signed by the owner and contractor, authorizing a change in the work or the time of completion.

Federal Unemployment Tax Act (FUTA)

A federal law that establishes a state-administered unemployment insurance program.

Contractor's Manual

A guide that provides standards and protocols for contractors regarding various aspects of construction management.

Workers Compensation Benefit

Compensation provided to employees who are injured at work, covering medical and rehabilitation costs.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

Income Statement

A financial statement that summarizes revenues, costs, and expenses incurred during a specific period.

Retainage

A portion of the agreed-upon contract price deliberately withheld until the work is substantially complete.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for.

Accounts Payable

Money owed by a business to its suppliers for credit purchases.

Working Capital

The difference between current assets and current liabilities, calculated as: \text{Working Capital} = \text{Current Assets} - \text{Current Liabilities}

Performance Bond

A surety bond issued to guarantee satisfactory completion of a project by a contractor.

Bid Bond

A bond that ensures the bidder on a contract will enter into the contract and provide the required performance and payment bonds if awarded.

Payment Bond

A surety bond posted by a contractor to guarantee that its subcontractors and material suppliers on the project will be paid.

Cash Basis Accounting

An accounting method where revenue and expenses are recorded only when cash actually changes hands.

Direct Costs

Expenses that can be directly attributed to a specific project, such as field labor, materials, and equipment rentals.

Quick Ratio (Acid-Test Ratio)

A liquidity ratio that measures a company's ability to meet short-term obligations with its most liquid assets, calculated as: \text{Quick Ratio} = \frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}}

Mechanic's Lien

A legal claim against a property by a contractor or supplier who has not been paid for work performed or materials provided.

Experience Modification Rate (EMR)

A factor used by insurance companies to gauge both past cost of injuries and future risk, impacting workers' compensation premiums.

Variable Overhead

Indirect costs that fluctuate in proportion to the volume of construction activity or production levels.

Debt-to-Equity Ratio

A leverage ratio that compares a company's total liabilities to its shareholders' equity, calculated as: \text{Debt-to-Equity Ratio} = \frac{\text{Total Liabilities}}{\text{Total Equity}}

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific project.

SBA Loan Eligibility

Criteria determining who is eligible to apply for a Small Business Administration (SBA) loan.

General Ledger

A primary bookkeeping record that compiles all financial transactions of a business to produce financial statements.

Cost of Goods Sold

The total direct cost of producing the goods sold by a company during a specific period.

Accrual System of Bookkeeping

An accounting method where revenue and expenses are recorded at the time they are earned or incurred, regardless of when cash is actually exchanged.

Percentage of Completion Method

An accounting method for recognizing revenue and expenses based on the portion of a project completed during the period.

Current Ratio

A liquidity ratio measuring a company's ability to pay off short-term obligations (Current Liabilities) with its short-term assets (Current Assets), calculated as: \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}

Net Profit Margin

A profitability metric calculated as net income divided by total revenue, expressed as a percentage: \text{Net Profit Margin} = (\frac{\text{Net Income}}{\text{Revenue}}) \times 100\%

Book Value

The value of an asset according to its balance sheet account balance, representing cost minus accumulated depreciation.

Depreciation

The systematic reduction in the recorded cost of a fixed asset over its estimated useful life.

Gain/Loss on Sale

The difference between the actual sale price received for an asset and its current book value at the time of the transaction.

Cash Sales

Sales where payment is received immediately at the time the transaction occurs.

Fixed Overhead

Ongoing business expenses that do not fluctuate with production volume, such as rent, insurance, and administrative salaries.

Change Order

A written amendment to a contract, signed by both owner and contractor, authorizing a change in work scope, price, or completion time.

Federal Unemployment Tax Act (FUTA)

A federal law that imposes a tax on employers to fund state-administered unemployment insurance programs.

Contractor's Manual

A reference guide providing standardized protocols and management procedures for contractors.

Workers Compensation Benefit

Insurance benefits provided to employees who suffer work-related injuries, covering medical treatments and lost wages.

Balance Sheet

A financial statement reporting a company's assets, liabilities, and shareholders' equity at a specific point in time.

Income Statement

A financial report summarizing a company's revenues, costs, and expenses over a specific period.

Retainage

A portion of the contract price withheld by the owner until the project is substantially complete to ensure the contractor finishes the work.

Accounts Receivable

Amounts owed to a business by customers for products or services that have been delivered but not yet paid for.

Accounts Payable

Money owed by a company to its creditors and suppliers for purchases made on credit.

Working Capital

The capital available for day-to-day operations, calculated as current assets minus current liabilities: \text{Working Capital} = \text{Current Assets} - \text{Current Liabilities}

Performance Bond

A surety bond that guarantees the contractor will complete the project according to the contract terms.

Bid Bond

A bond ensuring that the bidder will enter into a contract and provide the required performance and payment bonds if awarded the project.

Payment Bond

A surety bond guaranteeing that the contractor will pay subcontractors, laborers, and material suppliers on the project.

Cash Basis Accounting

An accounting method where revenue is recorded when cash is received and expenses are recorded when cash is paid.

Direct Costs

Expenses directly linked to a specific project, including labor, materials, and equipment used on-site.

Quick Ratio (Acid-Test Ratio)

A strict liquidity measure that excludes inventory from current assets, calculated as: \text{Quick Ratio} = \frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}}