Accountancy Concepts

Question 1

The modern method of accounting is based on the system created by
an Italian monk __________________

Answer 1

Fra Luca Pacioli.

Question 2

In the past, many businesses maintained their records manually in
books – hence the term ___________ came about. This method of
keeping manual records was cumbersome, slow, and prone to human
errors of translation.

Answer 2

“bookkeeping”

Question 3

A faster, more organized, and easier method of maintaining books is
using ___________________________

Answer 3

Computerized Accounting Programs.

Question 4

is the system a company uses to measure its financial
performance by noting and classifying all the transactions like sales,
purchases, assets, and liabilities in a manner that adheres to certain
accepted standard formats. It helps to evaluate a Company’s past
performance, present condition, and future prospects.

Answer 4

Accounting

Question 5

the art of recording,
classifying, and summarizing in a significant manner and in terms
of money, transactions and events which are, in part at least, of a
financial character and interpreting the results thereof.

Answer 5

Accounting

Question 6

We have said that accounting consists of these functions:

Answer 6

• Recording
• Classifying
• Summarizing
• Reporting and evaluating the financial activities of a business

Question 7

Evidence of the transaction is

called a ___________

Answer 7

Document

Question 8

Recording is first

carried out in a book of original entry called the _______.

Answer 8

journal.

Question 9

a record, listing transactions in a chronological order.

Answer 9

Journal

Question 10

The principal modules commonly used are:

Answer 10

• General Ledger
• Inventory
• Order Entry
• Accounts Receivable
• Accounts Payable
• Bank Manager
• Payroll

Question 11

In general, business entity or organizations are:

Answer 11

• Sole proprietorship
• Partnerships
• Corporations

Question 12

is a business wholly owned by a single
individual. It is the easiest and the least expensive way to start a
business and is often associated with small storekeepers, service
shops, and professional people such as doctors, lawyers, or
accountants.

Answer 12

sole proprietorship

Question 13

is the most common form of

business organization and is relatively free from legal complexities.

Answer 13

sole proprietorship

Question 14

One major advantage of sole proprietorship is few liability
since the owner and the business are regarded as the same, from a
legal standpoint. True or False>

Answer 14

False, it has unlimited liability

Question 15

is a legal association of two or more individuals called
partners and who are co-owners of a business for profit. Like
proprietorships, they are easy to form.

Answer 15

Partnerships

Question 16

This type of business
organization is based upon a written agreement that details the
various interests and right of the partners and it is advisable to get
legal advice and document each person’s rights and responsibilities.

Answer 16

Partnerships

Question 17

There are three main kinds of partnerships

Answer 17

• General partnership
• Limited partnership
• Master limited partnership

Question 18

A business that is owned and operated by 2 or more persons where
each individual has a right as a co-owner and is liable for the
business’s debts.

Answer 18

General Partnership

Question 19

A partnership must secure a Federal Employee Identification
number from the Internal Revenue Service (IRS) using special
forms.

Answer 19

General Partnership

Question 20

Each partner in General Partnership reports his share of partnership profits or losses on his
individual tax return and pays the tax on those profits. The
partnership itself does not pay any taxes on its tax return. True or False?

Answer 20

True

Question 21

One or more partners run the business as
General Partners and the remaining partners are passive investors
who become limited partners and are personally liable only for the
amount of their investments.

Answer 21

Limited partnership

Question 22

They are called limited partners
because they cannot be sued for more money than they have invested
in the business. True or False?

Answer 22

True

Question 23

are commonly used for real-estate

syndication.

Answer 23

Limited Partnership

Question 24

are similar to Corporations trading
partnership units on listed stock exchanges. They have many
advantages that are similar to Corporations e.g. Limited liability,
unlimited life, and transferable ownership. In addition, they have the
added advantage if 90% of their income is from passive sources (e.g.
rental income), then they pay no corporate taxes since the profits are
paid to the stockholders who are taxed at individual rates.

Answer 24

Master Limited Partnership

Question 25

is the most dominant form of business

organization in our society.

Answer 25

Corporation

Question 26

is a legally chartered
enterprise with most legal rights of a person including the right to
conduct business, own, sell and transfer property, make contracts,
borrow money, sue and be sued, and pay taxes.

Answer 26

Corporation

Question 27

The modern Corporation evolved in the beginning of this century
when large sums of money were required to build railroads and steel
mills and the like and no one individual or partnership could hope to
raise. True or False?

Answer 27

True

Question 28

The strength of a Corporation

Answer 28

its ownership and management

are separate.

Question 29

Some of the disadvantages of Corporations are that incorporated
businesses suffer from higher taxes than unincorporated businesses.
In addition, shareholders must pay income tax on their share of the
Company’s profit that they receive as dividends. This means that
corporate profits are taxed twice. True or False?

Answer 29

True