FUNACC ( ASSETS, LIABILITY,EQUITY, AND INCOME STATEMENT)

Question 1

EXAMPLES OF CURRENT ASSETS

Answer 1

1. Cash- that include coins, currencies, checks, bank deposits, and other cash items readily available for use in the operations of the business.
2. Cash equivalents- Short-term investments that are readily convertible to known amounts of cash which are subject to an insignificant risk to changes in value.
3. Marketable securities- stocks and bonds purchased by the enterprise and are to be held for only a short period or duration. They are usually purchased when a business has excess cash.
4. Trade and other receivables-
5. Inventories- represent the unsold goods at the end of the accounting period. This is applicable only to a merchandising business.
6. Prepaid Expenses- include supplies bought for use in the business or services and benefits to be received by the business in the future paid in advance.
7. Contra-asset accounts

Question 2

Trade and other receivables

Answer 2

include the amounts collectible from

• accounts receivable
  -notes receivable
  -interest receivable
  -advances to employees
• accrued income

Question 2

Trade and other receivables

Answer 2

1. ACCOUNTS RECEIVABLE-amount collectible from the customer to whom sales have been made or services have been rendered on account or credit

2.NOTES RECEIVABLE- promissory note issued by the client or the customer in exchange for services or goods received as evidence of his/her obligation to pay

3. INTEREST RECEIVABLE - amount of interest collectible on promissory notes received
   from customers and clients
4. ADVANCES TO EMPLOYEES - certain amount of money loaned to employees payable in cash or through salary deductions
5. ACCRUED INCOME-income already earned but not yet received

Question 2

( EXAMPLES OF CURRENT ASSETS) Contra-asset accounts

Answer 2

a. Allowance for bad debts
b. Accumulated depreciation

Question 3

2 KINDS OF CONTRA ASSETS ACCOUNTS

Answer 3

a. Allowance for bad debts - losses due to uncollectible accounts. This is deducted from the accounts receivable account to get the net realizable value. This is in line with the financial statements’ qualitative characteristic of conservatism wherein no profits would be anticipated but all probable or estimable losses should be provided.

b. Accumulated depreciation - represents the expired cost of property, plant, and equipment as a result of usage and passage of time. This is deducted from the cost of the related asset account to get the carrying value or book value of the
asset.

Question 4

(CLASSIFICATION OF NON CURRENT ASSETS)

Answer 4

1. Long-term investments - assets held by an enterprise for the accretion of wealth through capital distribution such as interests, royalties, dividends and rentals, for capital appreciation or for other benefits to the investing enterprise such as those obtained through trading relationships. Investments are classified as long-term when they are intended to be held for an extended period of time.
2. Property, plant, and equipment- tangible assets that are held by an enterprise for use in the production or supply of goods or services, or for administrative purposes These assets are expected to be used for more than one period.
3. Intangible assets- identifiable, non-monetary assets without physical substance held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. These include goodwill, patents, copyrights, licenses, franchises, trademarks, brand names, secret processes, subscription lists, and non- competition agreements.

Question 4

examples of PROPERTY,PLANTS AND EQUIPMENT

Answer 4

a. land- a piece of lot or real estate owned by the enterprise on which a be constructed for business purposes. building can

b. building- edifice or structure used to accommodate the office, store, or factory of a business enterprise in the conduct of its operations.

c. equipment - includes a typewriter, air-conditioner, calculator, filing cabinet computer, electric fan, trucks, and cars used by the business in its office, store, or factory. Specific account titles may be used such as office equipment, store equipment delivery equipment, transportation equipment, and machinery equipment.

d. furniture and fixtures - include tables, chairs, carpets, curtains, lamp and lighting fixtures, and wall decors. Specific account titles may be used such as office furniture and fixtures, and store furniture and fixtures.

Question 4

TYPES OF PAYABLES ( CURRENT LIABILITY )

Answer 4

1. Accounts payable include debts arising from the purchase of an asset or the acquisition of services on account.
2. Notes payable include debts arising from the purchase of an asset or the acquisition of services on account evidenced by a promissory note.
3. Loan payable is a liability to pay the bank or other financing institution arising from funds borrowed by the business from these institutions payable within twelve months or shorter. (Note: If the loan is payable beyond twelve months, then it is classified under non-current liabilities.)
4. Utilities payable is an obligation to pay utility companies for services received from them. Examples of this are telephone services to PLDT, electricity to Meralco, and water services to Maynilad.
5. Unearned revenues represent obligations of the business arising from advanc payments received before goods or services are provided to the customer. This will be settled when certain goods or services are delivered or rendered.

6 Accrued liabilities include amounts owed to others for expenses already incurred but are not yet paid. Examples of these are salaries payable, utilities payable, taxes payable, and interest payable.

Question 4

EXAMPLES OF NON CURRENT LIABILITIES

Answer 4

1. Mortgage payable is a long-term debt of the business with security or collateral in the form of real properties. In case the business fails to pay the obligation, the creditor can foreclose or cause the mortgaged asset to be sold and use the proceeds of the sale to settle the obligation.
2. Bonds payable is a certificate of indebtedness under the seal of a corporation, specifying the terms of repayment and the rate of interest to be charged.

Question 4

OWNERS EQUITY

Answer 4

CAPITAL is an account bearing the name of the owner representing the original and additional investment of the owner of the business increased by the amount of net income earned during the year. It is decreased by the cash or other assets withdrawn by the owner as well as the net loss incurred during the year.

DRAWING represents the withdrawals made by the owner of the business in cash or other
assets.

INCOME SUMMARY is a temporary account used at the end of the accounting period to close income and expense accounts. The balance of this account shows the net income or net loss for the period before it is closed to the capital account.

Question 4

FUNCTIONS OF ACCOUNTING

Answer 4

IDENTIFYING ►” Monetary Value”
RECORDING ►business transactions “JOURNAL:
CLASSIFYING ► grouping “LEDGERS:
SUMMARIZING ► “TRIAL BALANCE”
COMMUNICATING ► “Financial Statements”
INTERPRETING ►meaning or significance for users

Question 5

Journal is often called

Answer 5

the book of original entries.

Question 6

Recording Phase of accounting is also called

Answer 6

journalizing

Question 7

The maintenance of records of transaction (business documents) up to the journalizing of business transactions is called

Answer 7

bookkeeping.