Chapter 2

Question 1

Business activities that are accountable

Answer 1

economic activities or transactions

Question 2

It is an expression of monetary worth applied to a particular asset, group of assets, business entity, or services rendered.

Answer 2

Value

Question 3

Two types of Business Transactions:

Answer 3

1. External transactions
2. Internal transactions

Question 4

Are economic events involving the enterprise and other entities. These events or transactions may involve transfer of resources or obligation to or from the entities.

Answer 4

External transactions or exchanges

Question 5

Are economic events in which only the enterprise participates.

Answer 5

Internal transactions

Question 6

Are the quantitative information reported in the statement of financial position and income statement. Considered as the building blocks of the financial statements.

Answer 6

Accounting elements

Question 7

The elements directly related to the measurement of financial position. These are the real accounts.

Answer 7

assets, liabilities and equity.

Question 8

The elements directly related to the measurement of financial performance. They provide information on the changes in equity as the result of business operations

Answer 8

income and expenses.

Question 9

Popularly known as income statement accounts. They are also called nominal accounts because their usefulness is limited to the year when they are incurred.

Answer 9

income and expenses

Question 10

Are properties or rights on properties owned by the business. These items of value are used by the enterprise in their day to day activities.

Answer 10

Assets

Question 11

Under the Revised Conceptual Framework, it is defined as a present economic

Answer 11

Asset

Question 12

It is a right that has the potential to produce economic benefits

Answer 12

Economic resource

Question 13

It is the time between acquisition of assets for processing and their realization in cash or cash equivalents.

Answer 13

operating cycle

Question 14

Includes currency or cash items on hand

Answer 14

Cash

Question 15

Are short term highly liquid investments that are readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Answer 15

Cash equivalents

Question 16

Investments which are readily marketable and represent temporary investment of funds available for current operations and are intended to meet working capital requirements.

Answer 16

Trading Securities

Question 17

Are open accounts or those that are not supported by promissory notes.

Answer 17

Accounts receivable

Question 18

A contra-asset account which is provided for possible losses from uncollected accounts.

Answer 18

Allowance for doubtful accounts

Question 19

Amount collectible that are evidenced by a promissory note or a written promise to pay

Answer 19

Notes receivables

Question 20

Goods held for sale by trading concern

Answer 20

Merchandise Inventory or merchandise

Question 21

Inventories held by manufacturing firms
advance

Answer 21

Finished goods, goods in process, raw materials and factory or manufacturing
supplies

Question 22

Rent paid in advance

Answer 22

Prepaid rent

Question 23

Insurance paid in advance

Answer 23

Prepaid insurance

Question 24

Stationary and other supplies purchased for use and are still unused.

Answer 24

Unused supplies

Question 25

All other assets except current assets are non-current assets. These include tangibl intangible, operating and financial assets of a long-term nature.

Answer 25

Non-Current Assets

Question 26

These are tangible assets which are held by the enterprise in production or supply goods or services, for rental to others, or for administrative purposes, and are expects be used during more than one period (PAS No.16)

Answer 26

Property, Plant and Equipment or Fixed Assets

Question 27

A piece of lot or real estate used by the business

Answer 27

Land

Question 28

A structure or building owned or controlled and used as office, store or factory of the enterprise

Answer 28

Building

Question 29

Include typewriters, adding machines, calculators, computers

Answer 29

Office equipment

Question 30

Include cash register, calculators

Answer 30

Store equipment

Question 31

Include delivery truck or jeep used for transporting merchandise

Answer 31

Delivery equipment

Question 32

Contra-account used to accumulate expired cost of fixed assets. It is a deduction from property, plant and equipment.

Answer 32

Accumulated depreciation

Question 33

Are assets held by an enterprise for the accretion of wealth

Answer 33

Investments

Question 34

It is readily realizable and is intended to be held for not more than one year.

Answer 34

Current investment

Question 35

It is intended to be held for more than one year.

Answer 35

Long-term investment

Question 36

It is defined by PAS 38 as identifiable non-monetary assets without physical substance.

Answer 36

intangible assets

Question 37

Right granted to authors, composers, playwrights, artists, publishers or distributors to publish and dispose of their works for a limited time.

Answer 37

Copyright

Question 38

Right granted to operate a utility or to manufacture or to market a product of another company within a specified area

Answer 38

Franchise

Question 39

Right granted to an inventor to manufacture or produce his inventions or products.

Answer 39

Patent

Question 40

A symbol, sign, slogan or name used to mark a or to distinguish it from other products. product

Answer 40

Trademark or brand name

Question 41

An intangible advantage that increases earnings over what is normal.

Answer 41

Goodwill

Question 42

It is defined as the present obligation of an entity to transfer an economic resource as a result of past events.

Answer 42

Liability

Question 43

Amounts due to other parties when it is evidenced by a promissory note

Answer 43

Notes payable

Question 44

Amounts due to suppliers for the purchase of goods or services on credit

Answer 44

Accounts payable

Question 45

Expenses incurred but not yet paid

Answer 45

Accrued expenses

Question 46

Unpaid interest on borrowings

Answer 46

Interest payable

Question 47

Services rendered by employees but still unpaid

Answer 47

Salaries payable

Question 48

Obligations due to banks for loans obtained (current portion)

Answer 48

Bank loans payable

Question 49

Income received but not yet earned.

Answer 49

Deferred revenue

Question 50

Amount due and payable by the enterprise to Social Security System

Answer 50

SSS premium payable

Question 51

Amount due and payable by the enterprise to Philippine Health Insurance Corporation

Answer 51

Phil Health premium payable

Question 52

Amount due and payable by the enterprise to BIR for the tax withheld from employees

Answer 52

Withholding tax payable

Question 53

Economic obligations secured by collateral

Answer 53

Mortgage payable

Question 54

Income received in advance but not yet earned and which will be realized as income over a period of more than one year or the normal operating cycle if it exceeds one year.

Answer 54

Deferred revenue

Question 55

Represents residual interest in the assets of the enterprise after deducting all liabilities. It is otherwise known as net assets or net worth.

Answer 55

Equity

Question 56

This includes the capital contribution of the owner made at the formation of the business or subsequent thereto.

Answer 56

Owners' capital

Question 57

This is used for recording the withdrawal of capital by the
owner

Answer 57

Owner's Drawing

Question 58

For a corporation, equity accounts are ordinary share or common stock and preference share or preferred stock. (not a question)

Answer 58

No answer

Question 59

Refers to the earnings of the enterprise.

Answer 59

Income

Question 60

Income is defined as increases in assets or decreases in liabilities that results in increases in equity, other than those relating to contributions from equity holders. (Not a question)

Answer 60

No answer

Question 61

Represents charges to clients or customers for services rendered

Answer 61

Service income

Question 62

Charges to clients by professionals for services rendered.

Answer 62

Professional fees or professional income

Question 63

Represent charges for the use of assets like equipment and spaces in buildings

Answer 63

Rent income

Question 64

Represents charges to customers for repair services rendered.

Answer 64

Repair income

Question 65

Represent charges to customers for laundry services rendered

Answer 65

Laundry income

Question 66

Represents charges to passengers for transportation services rendered

Answer 66

Transportation income or fares earned

Question 67

Represent amount of tickets sold to watchers of games, shows or movies

Answer 67

Ticket sales

Question 68

Income earned by the business coming from other sources which is not the main line of business and could not be clearly identified

Answer 68

Miscellaneous income

Question 69

Represent income from the sale of merchandise

Answer 69

Sales

Question 70

Represent deduction from sales due to merchandise returned by customers

Answer 70

Sales returns

Question 71

Represent deductions from selling price of goods with defec goods sent to customers but not as ordered. The goods are retained by customers.

Answer 71

Sales allowances

Question 72

Deductions from the selling price due to payments of th within the discount period.

Answer 72

Sales discounts

Question 73

It is defined as decrease in assets or increase in liabilities that results in decreases in equity, other than those relating to distributions to equity holders.

Answer 73

Expense

Question 74

These accounts represent the value of the goods sold.

Answer 74

Cost Accounts

Question 75

Represent the original acquisition price of the goods for resale

Answer 75

Purchases

Question 76

Represent the cost of goods purchased but returned to suppliers because they are either damaged, defective or unacceptable

Answer 76

Purchase returns

Question 77

Represent the reduction in the cost of defective or damaged goods bought but nor returned to the supplier

Answer 77

Purchase allowances

Question 78

Represent the reduction in the amount to be paid to the supplier due to payment of account within the discount period

Answer 78

Purchase discounts

Question 79

Represent the cost of transporting goods purchased from the suppliers to the store or the warehouse of the business

Answer 79

Freight in

Question 80

Represents the value of services rendered by employees and laborers. Account titles like office salaries, sales salaries and the like may be used.

Answer 80

Salaries and Wages

Question 81

Includes advertising or promotional expenses. This includes cost of publication in print media and propaganda in radio and television

Answer 81

Advertising expense

Question 82

Amount paid or incurred for the use of properties

Answer 82

Rent expense

Question 83

Amount paid to maintain company assets in good working conditions

Answer 83

Repairs and Maintenance

Question 84

Amount paid for services of conveyance or means of transportation of goods to customers

Answer 84

Transportation expense

Question 85

Amount of taxes and other licenses paid to the government

Answer 85

Taxes and licenses

Question 86

It is the portion of the cost of a fixed asset that is charged or allocated as expense for the period

Answer 86

Depreciation expense

Question 87

Premiums on insurance policies charged to expense

Answer 87

Insurance expense

Question 88

Amount of supplies used. Specifically termed as office supplies expense or store supplies expense

Answer 88

Supplies expense

Question 89

Cost of light and water consumed by the business. An account title Water and Electricity or Heat, Light and Water may be used

Answer 89

Utilities expense

Question 90

Represent value placed on activities that will promote goodwill and increase customers' patronage.

Answer 90

Representation and Entertainment

Question 91

Amount paid for postage, telephone and other forms of communication

Answer 91

Postage and Communications

Question 92

Contributions of employer to the Social Security System

Answer 92

SSS Premiums

Question 93

Relatively small amount paid for items or services which do not fall under the above accounts.

Answer 93

Miscellaneous expense