Accounting Overview

Question 1

Information designed to meet the common needs of most statement users.

Answer 1

General Purpose

Question 2

Information designed to meet the needs of a specific or a particular user.

Answer 2

Special Purpose

Question 3

Provide helpful information about past events and help in predicting future events or in taking action to deal with possible future events.

Answer 3

Relevance

Question 4

Provides information about past events.

Answer 4

Confirmatory Value

Question 5

Provides predictive power regarding possible future events.

Answer 5

Predictive Value

Question 6

The degree to which information is free from bias. Note that there are subjectivity and estimation involved in financial statements, therefore information cannot be truly “neutral.”

Answer 6

Neutrality

Question 7

Should not exclude any transaction.

Answer 7

Complete

Question 8

Extent to which information is reproducible given the same data and assumptions.

Answer 8

Verifiability

Question 9

Implies that users of financial statements must be able to compare aspects of an entity at one time and over time, and between entities at one time and over time. Therefore, the measurement and display of transactions and events should be carried out in a consistent manner throughout an entity, or fully explained if they are measured or displayed differently.

Answer 9

Comparability

Question 10

Preparers of information have classified, characterised and presented the information clearly and concisely. The financial reports are prepared with the assumption that its users have a ‘reasonable knowledge’ of the business and its economic activities.

Answer 10

Understandability

Question 11

Available to all stakeholders in time for decision-making purposes.

Answer 11

Timeliness

Question 12

Measures business activities, processes information into reports, and communicates the reports to decision-makers.

Answer 12

Accounting as an Information System

Question 13

To provide quantitative financial information about a business that is useful to statement users, particularly owners and creditors, in making economic decisions.

Answer 13

Objective of Accounting

Question 14

One that operates primarily for profit.

Answer 14

Business Entity

Question 15

Separately identifiable combination of persons and property that uses or controls economic resources to achieve certain goals or objects and use accounting to record economic activities, process data, and disseminate information intended to be useful in making, economic decisions.

Answer 15

Economic Entities

Question 16

Activities that affect the economic resources (assets) and obligations (liabilities) and, consequently the equity of an economic entity.

Answer 16

Economic Activities

Question 17

The process of converting economic resources into outputs of goods and services that are intended to have greater utility than the required inputs.

Answer 17

Production

Question 18

The process of trading resources or obligations for other resources or obligations.

Answer 18

Exchanges

Question 19

The process of using the final output of the production process.

Answer 19

Consumption

Question 20

The process of allocating rights to the use of output among individuals and groups in society.

Answer 20

Income Distribution

Question 21

The process of setting aside rights to present consumption in exchange for using current rights for future consumption.

Answer 21

Savings

Question 22

The process of using current inputs to increase the stock of resources available for output as opposed to immediate consumable output.

Answer 22

Investment

Question 23

Refers to the process of recording the accounts or transactions of an entity, which normally ends with the preparation of the trial balance.

Answer 23

Bookkeeping

Question 24

Consolidates financial information to make it understandable and clear for all stakeholders and helps businesses maintain timely and accurate records of their finances.

Answer 24

Accounting