Listed below are several transactions that took place during the first two years of operations for an accounting firm. Amounts billed to clients for services rendered Cash collected from clients Cash disbursements: Salaries paid to employees for services rendered during the year Year 1 $ 260,000 Year 2 $325,000 208,000 293,000 104,000 130,000 62,000 87,000 64,000 Utilities Purchase of insurance policy Additional information: Utility costs - Year 1 Liabilities End of Year 2 Anticipated bad debts on receivables Insurance policy term Required: 1. Calculate the net operating cash flow for years 1 and 2. 4 years $50,000 e 2. Calculate the amount of receivables from clients that the firm would show in its year 1 and year 2 balance sheets prepared according to the accrual accounting model. 3. Prepare an income statement for each year according to the accrual accounting model.

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…