Exam 1: Accounting and the Business Environment

A law firm provides legal services for clients who do not pay immediately. There is no effect on the accounting equation until the clients pay for the services.

Jackson Electric Services incurred $800 as a repair expense and paid for it in cash. This transaction will ________.

The total amount of assets a business possesses may or may not be equal to the total of liabilities and equity of the business.

In a statement of retained earnings, decreases in retained earnings result from ________.

Which of the following is a characteristic of a corporation?

Certified Management Accountants (CMAs) specialize only in financial management knowledge and always work for a single company.

Which of the following is shown on the balance sheet as well as the statement of cash flows?

A transaction is any event that affects the financial position of the business and can be easily estimated.

Gena's Cleaning Services performs services for its customers during March. Payments for the March services are received in June. How does the transaction for the collection of cash from customers affect the accounting equation of Gena's Cleaning Services?

The Securities and Exchange Commission allows U.S. businesses to choose whether they follow U.S. GAAP or International Financial Reporting Standards.

An accounting firm collected cash on account. As a result of this transaction, assets and revenues increase.

Newton Corporation settles a liability by making a payment in cash. How does paying this liability affect the accounting equation of the business?

Lisa Smith decided to start her CPA practice as a professional corporation, Smith CPA, PC. The corporation purchased an office building for $35,000. The real estate agent said the building was worth $50,000 in the current market. The corporation recorded the building as a $50,000 asset because Lisa believes that is the real value of the building. Which of the following concepts or principles of accounting is being violated?

Under the going concern principle, accountants must provide proof that the business will remain in operations long enough to use existing resources for their intended purpose.

Which of the following financial statements reports an increase or decrease in net cash during a specific period of time?

The amount of net income is transferred from ________ to ________.

Provide the definition of each of the following accounting assumptions or principles. Assumption or Principle Definition Going Concern Assumption Cost Principle

Decision makers are looking for an international accounting language because the most significant change in the business world in the last decade has been the huge increase in international commerce.

Prepare an income statement and a statement of retained earnings for the month of June. Also, prepare a balance sheet at June 30. The transactions of Modern Designer Corporation for the first month of their operations are as follows: • On June 1, 2019, Modern Designer Corporation received $25,000 cash from its stockholders and gave common stock to the stockholders. • The company rendered services to three clients on account with total revenues earned of $9,000. • It then incurred an advertising expense on four different web sites and promised to pay a total of $1,200 at a later date. • On June 13, Modern Designer purchased $1,000 worth of office supplies for cash. (The supplies are not used by June 30.) • On June 22, it received $2,000 on account from a client and deposited it into the business account. • On June 23, it incurred $1,300 for a legal expense and paid cash. • On June 30, Modern Designer made a payment of $500 to one of the web sites that it owed for advertising provided earlier in the month. • No dividends were paid during the month.

Maxwell Plumbing Services earned $500 by completing a job for Smith Company. The $500 earned by Maxwell Plumbing Services is its ________.