Accounting 'The Language of Business'

S Corporation

- Where owners avoid double taxation and have limited liability - treated as a separate legal entity - Corporations earnings are tax free

If the trial balance totals are not equal, the error may have been caused by a transposition if the difference is divisible by

9

Income Statement

A financial statement showing the revenue and expenses for a fiscal period.

AAA

A group of accounting educators who offer their opinions about FASB statements

Sarbanes-Oxley Act

A law passed by Congress that requires firm's financial statements are accurate. DOES NOT ALLOW accountants from offering a broad range of consulting services to publicly traded companies they audit

The group of accounting educators who offer their opinions about proposed FASB statements, after research has been done to determine the possible effects on financial reporting and the economy, is the _____________. FCC SEC AICPA AAA

AAA

What must an individual do to become a CPA? must have a certain number of college credits pass Uniform CPA Examination Fulfill the experience requirements of the state of practice.

All of the above

Certified Public Accountant (CPA)

An INDEPENDENT accountant who provides services to public for a fee DOES NOT provide investment services

Revenue

An increase in owner's equity resulting from the operation of a business

Owner's Equity

An owners net worth

When a business sells services on credit

Assets increase and revenue increases

The cost of goods sold is calculated as follows

Beginning merch Inventory plus New Delivered Cost of Purchases less Ending Merch Inv equals Cost of Goods Sold and Total merch available for sale

An independent accountant who performs financial audits is a Certified Internal Auditor (CIA). Certified Management Accountant (CMA). Certified Public Accountant (CPA). Internal Revenue Agent.

Certified Public Accountant

All are steps in the closing proces except

Close owner's capital to income summary

Separate Entity Assumption

Concept of keeping firms' financial records separate from the owner's personal financial records.

Which of the following statements is not correct? Reversing entries are made to reverse the effect of certain adjustments. Reversing entries provide a way to guard against oversights, eliminate the review of accounting records, and simplify the entry made in the new period. You Answered A reversing entry is the exact opposite (the reverse) of the adjustment. After the reversing entry is posted for the adjustment made to recognize the salaries expense at the end of the accounting period, the Salaries Expense account will have a zero balance and the Salaries Payable account will have a credit balance.

D

The adjusting entry to record accrued interest on a note payable would include a

Debit to the interest expense account and a credit to the interest payable account

What is an example of something that is NOT an asset

Equipment

Amounts that a business must pay in the future are known as

Exenses

The separate entity assumption applies only to the corporate form of business. True or False

False

SEC

Federal agency that oversees financial info of PUBLIC CORPORATIONS PUBLIC CORPS trade over counter markets

Managerial Accounting

Includes a wide range of work done by accountants employed by a SINGLE business industry

Fundamentals of accounting equation

Owners Equity + Liability = Assets

Corporation

Publicly/Privately owned business that is separate from its owners and has a legal right to own property and do business in its own name; stockholders are not responsible for debt or taxes of business.

Regulatory Agencies and Investors

REQUIRES- publicly owned corporations to submit financial statements atleast 1 time a year

Define Accounting

The process where financial info about businesses is recorded and communicated to other members of the business

Expense

a decrease in owner's equity resulting from the operation of a business

The balance of the owner's drawing account is listed in the

calculation of ending capital on a statement of owner's equity

inventory turnover is calculated by

dividing average inventory by cost of goods sold

An income statement that lists all revenue in one section and all expenses in another section is known as a

single step income statement

The balance sheet is also known as

statement of financial position

Financial Statements

- periodic reports of a firm's financial position and operating results - determine whether or not business if profitable - determine debt of business

Governmental Accounting

Accounting work performed for a federal, state, or local governmental unit.

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). Financial Accounting Standards Board (FASB). American Institute of Certified Public Accountants (AICPA). Securities and Exchange Commission (SEC).

American Accounting Association (AAA).

Partnership

Business owned by 2 or more who are legally responsible for debt and taxes of the business Responsibility for business debt if the firm is unable to pay. PARTNERS INDIVIDUALLY AND JOINTLY

Under a periodic inventory system, the Merchandise Inventory account is debited when goods are purchased for resale and credited when goods are sold and delivered to customers.

False

Which of the following is not a service typically provided by public accounting firms? Auditing Tax accounting Management advisory services Investing services

Investing services

Stock

Issues in the form of stock certificates, it represents the ownership of the corp.

The review of financial statements to assess their fairness and adherence to GAAP is auditing. accounting. accounting system. management advisory services.

auditing

The rules to combine amounts and complete the adjusted trial balance section of the worksheet include all except

if account had a debit balance in trial balance section and debit entry in adjustment section, subtract the 2

Accrued expenses are

used in one period but not paid for or recorded until a later period

When a business collects from accounts recievable do total assets change

yes

On January 2, 2010, a firm purchased equipment for $8,500. Depreciation expense for the year ended December 31, 2011, given the straight-line method, a 5-year useful life, and a salvage value of $1,500, is

1,400

The beginning capital balance shown on a statement of owner's equity is $100,000. Net income for the period is $50,000. The owner withdrew $25,000 cash from the business and made no additional investments during the period. The owner's capital balance at the end of the period is

125,000

On May 1, 2010, a firm purchased a 1-year insurance policy for $3,600 and paid the full premium in advance. The insurance expense associated with this policy for 2010 is

2,400

The following are all characteristics of a sole proprietorship except: The owner of a sole proprietorship is legally responsible for the debts of the business. A sole proprietorship is legally separate from its owner. The owner's income and the income of the business are combined to compute the total tax responsibility of the owner. The life of the business ends when the owner is no longer willing or able to keep the business going.

A sole proprietorship is legally separate from its owner

The following are all government agencies except Securities and Exchange Commission (SEC). American Institute of Certified Public Accountants (AICPA). Internal Revenue Service (IRS). Federal Bureau of Investigation (FBI).

AICPA

What is an auditors report?

Confirms the financial info is prepared in conformity with generally accepted accounting principles. An independent accountant's audit or review of a firm's financial statements.

gross profit on sales is calculated by subtracting

Cost of goods sold from net sales

Which of the following statements is not correct? All adjustments are shown on the worksheet. After the financial statements have been prepared, the adjustments are made a permanent part of the accounting records. Adjustments are recorded in the general journal as adjusting journal entries and are posted to the general ledger. All of the above statements are correct.

D

What is a balance sheet?

Formal report of the firms assets, liabilities and owner's equity

The entity that has final authority over the financial reporting of publicly owned corporations is the Securities and Exchange Commission (SEC). Financial Accounting Standards Board (FASB). Federal Trade Commission (FTC). Internal Revenue Service (IRS).

Securities and Exchange Commission

Which 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 that they audit. The Sarbanes-Oxley Act requires accounting firms to change the lead audit or coordinating partner and the reviewing partner for a company every five years. It is a felony to "knowingly" destroy or create documents to "impede, obstruct or influence" any existing or contemplated federal investigation. Wall Street investment firms are prohibited from retaliating against analysts who criticize investment-banking clients of the firm

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

What are generally accepted accounting principles (GAAP)

The review of financial statements to assess their fairness and adherence to GAAP is....auditing. Accounting standards developed and applied by professional accountants.

The Securities and Exchange Commission (SEC) requires that publicly owned corporations submit financial statements to it at least one time each year. True or False

True

The balance of the Merchandise Inventory account that appears in the Trial Balance section of the worksheet represents the stock of goods on hand at the beginning of the current period.

True

Sole Proprietorship

business owned and operated by one person ends when owner is unable to carry on or dies OWNER IS RESPONSIBLE FOR DEBT IF BUSINESS IS UNABLE TO PAY

The financial statements submitted by a corporation to the SEC include the auditor's report. The auditor's report: interprets the financial performance of the corporation. certifies that the financial statements are completely accurate. confirms that the financial information is prepared in conformity with generally accepted accounting principles. publishes the salaries of all of the officers of the corporation.

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

During the year, Spirit Fun had net credit sales of $800,000. Past experience shows that 1.5 percent of the firm's net credit sales will be uncollectible. Determine the adjusting entry needed to recognize the estimated expense for these uncollectible accounts.

debit UNCOLLECTIBLE accounts expense 12,000 and credit allowance for doubtful accounts 12,000

Modern products paid cash to a creditor. To record this transaction, the accountant would

debit accounts payable and credit cash

The e try to place the ending inventory on the books would include a

debit to the merchandise inventory account and a credit to the income summary account

Liabilities

debts that you owe

Which of the following is NOT a type of information communicated by the financial statements? Whether or not the business is profitable how long the business has been in operation how much the business owes others what types of assets business owns

how long the business has been in operation

With the accrual basis of accounting, it is appropriate to recignize revenue from a credit sale

on the date of the sale

Identify the advantages of forming a business as an S Corporation. the owner is personally responsible for debts of the business and earnings are reported directly on the owner's personal tax return treated as a separate legal entity and owners avoid double taxation owners have limited liability and corporation's earnings are tax-free owners avoid double taxation and owners have limited liability

owners avoid double taxation and owners have limited liability

Assets

property owned by a business

Allowance for Doubtful Accounts is

subtracted from accounts receivable in the assets section of the balance sheet