prelim

Question 1

It is a service activity. It’s function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision

Answer 1

ACCOUNTING

Question 2

In the Philippines, bookkeeping was introduced by the Spaniards and the bookkeeper was called

Answer 2

Tenedor de Libro

Question 3

IMPORTANCE OF ACTG (3)

Answer 3

personal level
professional level
business level

Question 4

FORMS OF BUSINESS ORGANIZATION

Answer 4

Sole or Single Proprietorship
Partnership
Corporation

Question 5

a business registered as an artificial person under the operation of law.

Answer 5

Corporation

Question 6

PRIMARY ACTIVITIES OF BUSINESSES

Answer 6

Servicing
Merchandising
Manufacturing

Question 7

Classified based on extent of their participation in the affairs of the business

Answer 7

users

Question 8

2 types of users

Answer 8

Internal users – management group

External users – financing and public groups

Question 9

The authoritative body of accountancy formulated standard principles, assumptions and procedures

Answer 9

“generally accepted accounting principles” (GAAP).

Question 10

BASIC PRINCIPLES

Answer 10

Objectivity Principle
Exchange Price or Cost Principle
Going Concern Principle
Monetary Measurement Principle
Revenue Recognition Principle
Business Entity Principle

Question 11

Objectivity Principle

Answer 11

Accounting information is supported by independent, unbiased evidence. It is intended to make financial statements useful by ensuring they report reliable and verifiable information.

Question 12

Cost Principle

Answer 12

Accounting information is based on actual cost.

Cost is measured on a cash or equal-to cash basis

Question 13

Going-Concern Principle

Answer 13

The assets are reported at cost but not reported at liquidation value that assume closure.
Reflects assumption that the business will continue operating instead of being closed or sold.

Question 14

Monetary Unit Principle

Answer 14

Express transactions and events in monetary, or money, units.

Question 15

Revenue Recognition Principle

Answer 15

1. Recognize revenue when it is earned.
2. Proceeds need not be in cash (Credit sales).
3. Measure revenue by cash received plus cash value of items received.

Question 16

Business Entity Principle

Answer 16

A business is accounted for separately from other business entities, including its owner.

Question 17

remember always:

Answer 17

ADELOR

Question 18

Income Statement

Answer 18

shows how wealth is produced by listing the revenues earned and expenses incurred by the business

Question 19

Statement of Owner’s Equity

Answer 19

shows why the net worth changed by listing the activities that caused it to increase or decrease

Question 20

Statement of Cash Flows

Answer 20

shows what happened to the cash by enumerating the activities of cash received and cash used by the business

Question 21

Statement of Financial Position

Answer 21

shows how the wealth of the business stands by enumerating the assets, liabilities and net worth of the business

Question 22

defined as debts or obligations of the business owing to outside parties like the banks, financing companies and suppliers of goods and services. These are obligations expected to be paid in the future.

Answer 22

Liabilities

Question 23

defined as things of value owned by the business. They benefit the business, are being used in operating the business and are expected to have long life. Assets initially come from investors and secondarily from creditors

Answer 23

Assets

Question 24

defined as the residual right or interest of the owner in the entity’s assets; after the creditors’ and suppliers’ claims are satisfied

Answer 24

Owner’s Equity

Question 25

There is an exchange of values There are two parties It is in terms of money

Answer 25

Three features of a transaction

Question 26

“names” assigned to transactions involved in an exchange of values

Answer 26

account

Question 27

paid in advance but not yet incurred

Answer 27

prepaid

Question 28

Due to be settled within 12 months of the Statement of Financial Position date

Answer 28

current

Question 29

NOT Due to be settled within 12 months of the Statement of Financial Position date

Answer 29

noncurrent

Question 30

business activity: includes investment made by owner, borrowed amounts from banks and other entities, drawings made by the owner and repayments to lenders

Answer 30

Financing

Question 31

business activity: includes acquisition of properties such as land, furniture, machineries and equipment as well as the eventual disposal of any of these on replacement or retirement date

Answer 31

Investing

Question 32

business activity: relating to the earning activities of the enterprise such as selling of goods or services and incurring of services or expenses

Answer 32

Operating

Question 33

net income can be computed by

Answer 33

Revenues – Costs & Expenses = Net Income

Question 34

Account may be expressed in a “T” device form

Answer 34

T-account

Question 35

form of T account

Answer 35

Debits are on the left hand while credits are on the right hand side of the letter “t”

Question 36

debtor

Answer 36

or borrower

Question 37

creditor

Answer 37

or lender