Question:
6)Independent CPAs in the public practice of accounting are viewed as employees of their clients
16)An "account" is a standardized format used to accumulate the effects of transactions on each financial statement item
29)In the long run, companies must report positive cash flow from operating activities in order to be successful. A company such as Papa John's that shows positive cash flows from operation over time will be less likely to need to borrow/issue more stock to finance expansion
32)The trial balance, prepared immediately after all transactions of the period have been recorded and posted, should show all account balances that are in the ledger(T-accounts)
33)An expense incurred and owed at the end of the accounting year will not be recognized until it is paid next year
35)It is necessary to prep income statement 1st cuz we need to know net income or loss for the period in order to computer ending retained earnings on the statement of stockholders' equity
Answers:
Well... I am a CPA and a financial analyst.
6 False. Very false. Their independence means they must be, by law, by their engagement letter and by ethics independent of their clients. This is only true on very rare occassions where a public CPA firm is engaged to do specific accounting tasks (e.g. compile the books).
16. True - by definition
29. True. Always true. You can't lose money forever. Companies go from their cash-losing start-up period to a growth period, whereby they must generate positive cash flows - or else they will go bankrupt.
32. True. If done correctly.
33. False. Accounting is done under the accrual basis. The expenses is recognized when it is a) measurable, b) likely and c) incurred
35) False. It is not necessary to do it all first. Accounting is done under the double-entry basis. Which means that if you do accounting on the balance sheet or income statement, it all balances. So if you do the income statement items first, it will flow through to the balance sheet. If you do it last, it will still flow to the balance sheet. However, it is EASIER to reconcile the changes in retained earnings on a net basis - but it is not required.
6. False. They provide their own materials and use their own methods and have their own place of business.
16. True That is the term that is used.
29. This should be logically true, but generally is not. Company policy has more to do with this than anything else. Tough to get a loan, if you are losing money. But this has little to do with your questions.
32. True. If you don't, you are going to have an error sometime.
33 False assuming you are on the accrual system. True if you are on a cash basis.
35. True. Unless you just want to guess.
I was a financial analyst, not an accountant. Perhaps you can tell from my comments. If a CPA gives you different answers, take theirs not mine. But my answers are more valuable in the real world of business.
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