ACCOUNTING

Question 1

shows the financial condition/position of a business as
of a given period. It consists of assets, liabilities, and
equity.

Answer 1

Statement of Financial Position or Balance Sheet

Question 2

shows the results of operations for a given
period of time. It consists of the revenue, cost, and
expenses.

Answer 2

Income Statement or Statement of Comprehensive
Income

Question 3

summarizes the cash
receipts and cash disbursements for the accounting
period.

It summarizes the cash activities of the
business by classifying cash inflows (receipts) and
cash outflows (payments or disbursements) into
operating, investing, and financing activities. It shows
the net increase or decrease of cash in a given period
and the cash balance at the end of the period. This
allows management to assess the business’ ability of
generate cash and project future cash flows.

Answer 3

statement of cash flows

Question 4

This
allows management to assess the business’ ability of
generate cash and project future cash flows.

Answer 4

statement of cash flows

Question 5

shows the changes
in the capital or owner’s equity as a result of additional
investment or withdrawals by the owner, plus or minus
the net income or net loss for the year.

Answer 5

statement of changes in equity

Question 6

are the
supplemental notes that are included with the
published financial statements of a company. The
notes are used to explain the assumptions used to
prepare the numbers in the financial statements, as
well as the accounting policies adopted by the
company. They help different types of users, such as
financial analysts and investors, to interpret all the
numbers added to the financial statements.

Answer 6

Notes to the Financial Statements

Question 7

They help different types of users, such as
financial analysts and investors, to interpret all the
numbers added to the financial statements.

Answer 7

Notes to the Financial Statements

Question 8

Are present economic resources controlled by an entity as a
result of past events. An economic resource is a right that has
the potential to produce economic benefits.

Answer 8

assets

Question 9

type of asset that is Expected to be realized in, or is intended for sale or
consumption in the entity’s normal operating cycle;

Answer 9

current assets

Question 10

type of asset that is held primarily for the purposes of trading

Answer 10

current asset

Question 11

type of asset that is Expected to be realized within twelve months of the
balance sheet date; or
Cash or cash equivalent unless it is restricted from
being exchanged or used to settle a liability for at least
twelve months after the balance sheet date.

Answer 11

current asset

Question 12

cash – coins, currencies, checks, bank deposits, and
other cash items readily available for use in the
operations of the business.

Answer 12

current assets

Question 13

Cash equivalents – are short-term, highly liquid
investments that are readily convertible to known
amounts of cash which are subject to an insignificant
risk to changes in value.

Answer 13

current assets

Question 14

Marketable securities – are stocks and bonds
purchased by an enterprise and are to be held for only
a short span of time or duration. They are usually
purchased when a business has excess cash.

Answer 14

current asset

Question 15

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

Answer 15

accounts receivable

Question 16

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

Answer 16

notes receivable

Question 17

amount of interest
collectible on promissory notes received from
customers or clients.

Answer 17

interest receivable

Question 18

certain amount of
money loaned to employees payable in cash
or through salary deductions.

Answer 18

Advances to employees

Question 19

– income already earned buy
not yet collected.

Answer 19

Accrued income

Question 20

represent the value of unsold goods at
the end of the accounting period.

Answer 20

inventory

Question 21

include supplies bought for use in
the business or services and benefits to be received by
the business in the future for which payment has been
made in advance.

Answer 21

prepaid expenses

Question 22

are accounts deducted form
the related asset accounts.

Answer 22

contra-asset accounts

Question 23

losses due
to uncollectible accounts. This is deducted
from the accounts receivable account to get
the net realizable value of accounts
receivable.

Answer 23

Allowance for doubtful accounts

Question 24

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 amount or book
value of the asset.

Answer 24

Accumulated depreciation

Question 25

Long-term investments are assets held by the 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.

Answer 25

non-current assets

Question 26

Property, plant, and equipment are tangible assets that are held by the enterprise for use in the production or supply of goods or services, or for administration purposes. These assets are expected to be used for more than one accounting period. ex: Land b. Building c. Equipment d. Furniture and fixtures

Answer 26

non-current asset

Question 27

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.

Answer 27

non-current assets

Question 28

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

Answer 28

liability

Question 29

It is expected to be settled within the entity’s normal operating cycle; 2. It is held primarily for the purpose of being traded; 3. It is due to be settled within twelve months after the balance sheet date; or 4. The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

Answer 29

current liability

Question 30

is prepared by the seller of the goods and sent to the buyer.

Answer 30

sales invoice

Question 31

a document issued by the carrier- a trucking, shipping, or airline- that specifies the contractual conditions and terms of delivery such as freight terms, time, place, and the person named to receive the goods.

Answer 31

bill of lading

Question 32

is a formal notice to the debtor detailing the accounts already due; commonly used by service businesses

Answer 32

statement of account

Question 33

evidences the receipt of cash by the seller or the authorized representative. It notes the accounts being paid and other details of the payment.

Answer 33

official receipt

Question 34

a written request to the purchaser of an entity from an employee or user department of the same entity that goods be purchased.

Answer 34

Purchase requisition

Question 35

an authorization made by the buyer to the seller to deliver the merchandise as detailed in the form.

Answer 35

Purchase order

Question 36

encourage the buyer to purchase products in greater quantity.

Answer 36

Trade discounts No entry is made in the accounting books to record trade discounts. Instead, all accounting entries are based on the invoice price.

Question 37

are given to encourage prompt payments; reducing the amount of resources tied up in accounts receivable.

Answer 37

Cash discounts

Question 38

is primarily used by businesses that sell relatively inexpensive goods and that are not yet using computerized scanning systems to analyze cost of goods sold.

Answer 38

periodic inventory system

Question 39

no entries are made to the inventory account as the merchandise are bought and sold.

Answer 39

periodic inventory system

Question 40

is an alternative to the periodic inventory system.

Answer 40

Perpetual inventory system

Question 41

the inventory account is continuously updated. is advisable for firms that sell low volume, high priced goods such as motor vehicles, jewelry and furniture.

Answer 41

Perpetual inventory system

Question 42

the effects of transactions and other events are recognized when they occur and not as cash is received or paid.

Answer 42

Accrual basis

Question 43

transactions are not recorded until cash is received or paid.

Answer 43

Cash basis

Question 44

cash receipts are treated as revenues and cash payments as expenses.

Question 45

The only way to know how successfully a business has operated is to close its doors, sell all its assets, pay the liabilities, and return any excess cash to the owners.

Answer 45

liquidation

Question 46

not a practical way of measuring business performance.

Answer 46

periodicity concept

Question 47

To provide timely information, accountants have divided the economic life of a business into artificial time periods. This assumption is referred to as the

Answer 47

periodicity concept.

Question 48

a period of any twelve consecutive months

Answer 48

Fiscal year

Question 49

12-month period ending December 31

Answer 49

Calendar year

Question 50

12-month period that ends when business activities are at their lowest level of the annual cycle.

Answer 50

Natural business year

Question 51

a period of less that one year

Answer 51

Interim period

Question 52

are expenditures paid in advance. These prepayments are assets, not expenses.

Answer 52

Prepaid expenses

Question 53

is the amount that the entity has paid to acquire the depreciable asset.

Answer 53

Asset cost

Question 54

the amount that the asset can probably be sold for at the end of its useful life.

Answer 54

Estimated salvage value

Question 55

the estimated number of periods that an entity can make use of an asset.

Answer 55

Estimated useful life