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chapter 2 Flashcards

accounting methods

1
Q

Accounting Methods recognized by the ______
_______.

A

Tax Code

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2
Q

The taxable income of a taxpayer shall be computed in accordance with the method of __________ he regularly employs in keeping his books.

A

accounting

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3
Q

The__________ of a taxpayer shall be computed in accordance with the method of accounting he regularly employs in keeping his books.

A

taxable income

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4
Q

In Accounting Methods recognized by the Tax Code”

However, if the taxpayer does not regularly employ a method of accounting which reasonably shows his correct income, the
computation of income shall be made in such manner as in the opinion of the _________________ or his -duly authorized representative that clearly reflects such income.

A

Commissioner of Internal Revenue

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5
Q

give the 6 method that can be used in accounting..

A
  1. cash basis
  2. accrual basis
  3. completion of contract basis
  4. percentage of completion basis
  5. installment basis
  6. crop year basis
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6
Q

is a method of accounting whereby all items of gross income received during the year shall be accounted for such taxable year and that only expenses actually paid for shall be claimed as deductions during the year.

A

cash basis

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7
Q

This method of accounting is generally used by taxpayers who do not keep regular books of accounts.

A

cash basis

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8
Q

Under this method, income is realized upon receipt of cash or its equivalent including those constructively received (such as deposits for the taxpayer’s account by customers) but not including gifts or donations.

A

cash basis

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9
Q

Users of ___________ accounting are mostly individuals engaged in business and practice of profession, professional partnerships and professional service Organizations.

A

cash basis

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10
Q

in cash basis:

is a method of accounting whereby all items of _________ received during the year shall be accounted for such taxable year and that only expenses actually paid for shall be claimed as _________ during the year.

A
  • gross income
  • deductions
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11
Q

in cash basis:

This method of accounting is generally used by __________ who do not keep regular books of accounts.

A

taxpayers

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12
Q

This method of accounting is generally used by taxpayers who do not keep regular books of accounts.

A

cash basis

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13
Q

________________

Under this method, income is realized upon _______ of cash or its equivalent including those constructively received (such as deposits for the taxpayer’s account by customers) but not including gifts or donations.

A

cash basis

receipt

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14
Q

______________

Under this method, income is realized upon receipt of cash or its equivalent including those constructively received (such as deposits for the taxpayer’s account by customers) but not including ____ or ___________.

A

cash basis

gifts / donations

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15
Q

Users of cash basis accounting are mostly ________ engaged in business and practice of profession, professional partnerships and professional service Organizations.

A

individuals

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16
Q

give the 4 Cash basis are mostly individual:

A

Engage in business
Practice of profession
Professional partnerships
Professional service organizations

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17
Q

is a method of accounting for income in the period it is earned regardless of whether it has been received or not.

A

accrual basis

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18
Q

In the same manner, expenses are accounted for in the period they are incurred and not in the period they are paid.

A

accrual basis

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19
Q

Under this method, net income is being measured by the excess of income earned during the period over the expenses incurred.

A

accrual basis

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20
Q

Expenses not being claimed as deductions by taxpayers in the current year when they are incurred cannot be claimed as deduction from income for the succeeding year.

A

accrual basis

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21
Q

Thus, a taxpayer who is authorized to deduct certain expenses and other allowable deductions for the current year but failed to do so cannot deduct the same for the next year.

A

accrual basis

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22
Q

. The accrual basis of accounting is being used by taxpayers whose nature of business uses __________ since this method of accounting will correctly reflect income by matching purchases and expenses against sales.

A

inventories

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23
Q

This method is being applied by most medium and large corporations.

A

accrual basis

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24
Q

is an accounting method applicable to contractors in the construction of building, installation of equipment and other fixed assets, or other construction work covering a period in excess of one year

A

Completion of Contract Basis

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25
Q

Under this method, all expenditures are deducted from gross income during the life of the contract which are properly allocated thereto, taking into consideration any materials and supplies charged to the work under the contract but remaining on hand at the time of the Completion.

A

Completion of Contract Basis

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26
Q

. Under this method, gross income is to be reported in the taxable year in which the contract is fully completed and accepted by the contractee if the taxpayer elected it as a consistent practice to treat such income, provided that such method clearly reflects the net income.

A

Completion of Contract Basis

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27
Q

However, pursuant to Republic Act No. 8424 which took effect on January 1, 1998, contractors are no longer allowed to adopt this method of reporting their income derived in whole or in part from long-term contracts.

A

Completion of Contract Basis

28
Q

Completion of Contract Basis

is an accounting method applicable to ___________ in the construction of building, installation of equipment and other fixed assets, or other construction work covering a period in excess of one year

A

contractors

29
Q

. Completion of Contract Basis

Under this method, ____________ is to be reported in the taxable year in which the contract is fully completed and accepted by the contractee if the taxpayer elected it as a consistent practice to treat such income, provided that such method clearly reflects the net income.

A

gross income

30
Q

Completion of Contract Basis

. Under this method, gross income is to be reported in the taxable year in which the contract is fully completed and accepted by the contractee if the taxpayer elected it as a consistent practice to treat such income, provided that such method clearly reflects the _____________

A

net income

31
Q

Completion of Contract Basis

Under this method, all ______________ are deducted from gross income during the life of the contract which are properly allocated thereto, taking into consideration any materials and supplies charged to the work under the contract but remaining on hand at the time of the Completion.

A

expenditures

32
Q

Completion of Contract Basis

  • However, pursuant to Republic Act No. _______ which took effect on January 1, 1998, contractors are no longer allowed to adopt this method of reporting their income derived in whole or in part from long-term contracts.
A

8424

33
Q

Completion of Contract Basis

  • However, pursuant to Republic Act No. 8424 which took effect on ______________ , contractors are no longer allowed to adopt this method of reporting their income derived in whole or in part from long-term contracts.

what year?

A

January 1, 1998

34
Q

is a method applicable in the case of a building, installation or construction contract covering a period in excess of one year whereby gross income derived from such contract may be reported upon the basis of percentage of completion.

A

Percentage of Completion Basis

35
Q

In determining the percentage of completion of a contract, generally one of the following methods is used:

A

Percentage of Completion Basis

36
Q

Percentage of Completion Basis

The _________ incurred under the contract as of the end of the tax year are compared with the
estimated total contract costs; or

A

costs

37
Q

Percentage of Completion Basis

The ____________ on the contract as of the end of the tax year is compared with the
estimated work to be performed.

A

work performed.

38
Q

Percentage of Completion Basis

In such case, the return should be accompanied by a __________ of the architect or engineer
showing the of completion during the taxable year of the entire work performed under contract.

A

certificate

39
Q

There should be deducted from such gross income all expenditures made during the taxable year on account of the contract, account being taken of the materials and supplies on hand at the beginning and end of the taxable period for use in connection with the work under the contract but not yet so applied. Beginning January 1, 1998 income from long-term contracts are required to be reported using this method only.

A

Percentage of Completion Basis

40
Q

Percentage of Completion Basis

There should be deducted from such _______________ all expenditures made during the taxable year on account of the contract, account being taken of the materials and supplies on hand at the beginning and end of the taxable period for use in connection with the work under the contract but not yet so applied. Beginning January 1, 1998 income from _______________ are required to be reported using this method only.

A

gross income

long-term contracts

41
Q

is a method considered appropriate when collections extend over relatively long periods of time and there is a strong possibility that full collection will not be made.

A

installment basis

42
Q

As customers make installment payments, the seller recognizes the gross profit on sale in proportion to the cash collected.

A

installment basis

43
Q

installment basis

is a method considered appropriate when __________ extend over relatively long periods of time and there is a strong possibility that full collection will not be made.

A

collections

44
Q

installment basis

As customers make installment payments, the __________ recognizes the gross profit on sale in proportion to the cash collected.

A

seller

45
Q

is a method applicable only to farmers engaged in the production of crops which take more than a year from the time of planting to the process of gathering and disposal.

A

crop year basis

46
Q

Expenses paid or incurred are deductible in the year the gross income from the sale of the crops are realized.

A

crop year basis

47
Q

Crop Year Basis

is a method applicable only to __________ engaged in the production of crops which take more than a year from the time of planting to the process of gathering and disposal.

A

farmers

48
Q

crop year basis

Expenses paid or incurred are ____________ in the year the gross income from the sale of the crops are realized.

A

deductible

49
Q

crop year basis

Expenses paid or incurred are deductible in the year the ___________ from the sale of the crops are realized.

A

gross income

50
Q

refers to the systematic and detailed recording of financial transactions of a business.

A

accounting

51
Q

is the process of recording financial transactions pertaining to a business.

A

accounting

52
Q

The accounting process includes _________, ________, and ________ these transactions to oversight agencies, regulators, and tax collection entities.

A

summarizing
analyzing
reporting

53
Q

Accounting plays a ____________ in running a business because it helps you track income and expenditures, ensure statutory compliance, and provide investors, management, and government with quantitative financial information which can be used in making business decisions.

A

vital role

54
Q

Accounting plays a vital role in running a business because it helps you___________ and _______________, ensure statutory compliance, and provide investors, management, and government with quantitative financial information which can be used in making business decisions.

A

track income
expenditures

55
Q

The _______________________ used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company’s operations, financial position, and cash flows.

A

financial statements

56
Q

what are the 3 financial statements generated by records.

A

income statement
balance sheet
cash flow statement

57
Q

provides you with information about the profit and loss

A

income statement

58
Q

gives you a clear picture on the financial position of your business on a particular date.

A

balance sheet

59
Q

is a bridge between the income statement and balance sheet and reports the cash generated and spent during a specific period of time.

A

cash flow statement

60
Q

is a structure of accounting methods focused on taxes rather than the appearance of public financial statements.

A

tax accounting

61
Q

___________ is governed by the Internal Revenue Code, which dictates the specific rules that companies and individuals must follow when preparing their tax returns.

A

tax accounting

62
Q

the tax accounting is a structure of accounting methods focused on taxes rather than the appearance of_____________________.

A

public financial statements.

63
Q

Tax accounting is governed by the _____________, which dictates the specific rules that companies and individuals must follow when preparing their tax returns.

A

Internal Revenue Code

64
Q

Internal Revenue Code dictates the _________ __________ that companies and individuals must follows.

A

specific rules

65
Q

Tax accounting on the other hand deals with:
4

A

taxes
tax preparation
tax returns
tax payments

taxation (2 decks)

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