Financial Accounting 1 & 2

Assume that a firm has the following information in its analysis of its business transactions during the first year of business: fees income of $7,000, an investment by the owner of $5,000, salaries expense of $4,000, and withdrawals of $2,000. What is the total amount of owner's equity that will be reported in the firm's balance sheet?

$6,000

Assume that, after analyzing its business transaction, a firm has the following ending balances: accounts payable $3,400, accounts receivable $2,000, cash 1,000, equipment $3,000, prepaid rent $600, and supplies $400. What is the total amount of assets that will be reported on the firm's balance sheet?

$7,000

The following are all characteristics of a sole proprietorship except

A sole proprietorship is legally separate from its owner.

The group of accounting educators who perform research to determine the possible effects on financial reporting and the economy and then offer their opinions about proposed FASB statements is the

American Accounting Association (AAA)

The following are all government agencies except

American Institute of Certified Public Accountants (AICPA)

An independent accountant who performs financial audits is a

Certified Public Accountant (CPA)

The financial statements submitted by a corporation to the SEC included in the auditors report. The auditors report:

Confirms that the financial information is prepared in conformity with generally accepted accounting principles.

Which of the following is not a service typically provided by a public accounting firms?

Investing services

To become a CPA, an individual

Must have a certain number of college credits in accounting courses. pass the Uniform CPA Examination. fulfill the experience requirements of the state of practice.

The entity that has final authority over the financial reporting of publicly owned corporations is the

Securities and Exchange Commission (SEC)

Which of the following is not a provision of the Sarbanes-Oxley act?

The Sarbanes-Oxley act allows accountants from offering a broad range of consulting services to publicly traded companies they audit.

Amounts that business must pay in the future are known as

accounts payable

When equipment is purchased on credit,

assets and liability increase.

When the owner invests cash in a business,

assets and owners equity increase

When the firm pays its utility bill upon receipt of that bill

assets decrease and and expenses increase.

When the owner withdraws cash for personal use,

assets decrease and the owners equity decreases.

When a business sells services on credit,

assets increase and revenues increase.

The review of financial statements to access their fairness and adherence to GAAP is

auditing

The balance sheet is also called

the statement of financial position

When a business collects an account receivable

total assets do not change.