Accounting Process: Chapter 1

Question 1

Financial Statement: a progress report showing a list of assets and liabilities.

Answer 1

Statement of Financial Position or Balance Sheet

Question 2

Father of Accounting

Answer 2

Fr. Luca Pacioli

Question 3

Financial Statement: a performance report of revenues against costs and expenses

Answer 3

Statement of Financial Performance or Income Statement

Question 4

Financial Statement: a performance report showing where the money came from and where the money was used

Answer 4

Statement of Cash Flows

Question 5

Financial Statement: a progress report showing changes in your wealth

Answer 5

Statement of Owner’s Equity

Question 6

An economic unit that engages in buying and selling of goods and services.

Answer 6

Business

Question 7

Someone who organizes, manages and takes the risk of putting up a business alone.

Answer 7

Entrepreneur

Question 8

The element of uncertainty in an outcome.

Answer 8

Risk

Question 9

A business set up and managed by one person.

Answer 9

Sole/Single Proprietorship

Question 10

A business owned by two or more persons called partners.

Answer 10

Partnership

Question 11

A form of business that can conduct business by itself.

Answer 11

Corporation

Question 12

Someone who buys shares of stocks in a corporation.

Answer 12

Shareholder

Question 13

A corporation is managed by a ________ elected by the shareholders from among themselves.

Answer 13

Board of Directors

Question 14

A type of business operation that render services.

Answer 14

Service business

Question 15

A type of business operation that buys and sells goods or merchandise.

Answer 15

Merchandising Business

Question 16

A type of business operation that buys raw materials, process them and sells them to customers.

Answer 16

Manufacturing Business

Question 17

A person or entity who has a “stake” or interest in the business.

Answer 17

Stakeholder

Question 18

The one who puts in capital

Answer 18

Owner or Investor

Question 19

Someone who is responsible for running the business.

Answer 19

Manager

Question 20

Someone who assesses the paying ability of the business-borrower.

Answer 20

Lender or Creditor

Question 21

Someone who offers goods or merchandise on cash basis or credit term.

Answer 21

Supplier

Question 22

Investigates tax returns and assesses truthfulness of the reported profit as well as the tax liability paid by the business.

Answer 22

Government

Question 23

Someone who assesses the ability of the business to grant his or her demands such as higher wages, benefits, etc.

Answer 23

Employee

Question 24

Management is an _______ user.

Answer 24

Internal user

Question 25

Internal reports prepared for management use.

Answer 25

Managerial Reports

Question 26

__________ enumerates the methods and procedures necessary to monitor the activities of the business and ensure efficient operation.

Answer 26

Internal Control

Question 27

The ________ prescribes that the advantages enjoyed must outweigh its cost.

Answer 27

Cost-Benefit Principle

Question 28

AIS

Answer 28

Accounting Information System

Question 29

______________ prescribes that the information must be reported promptly and that information must be useful to enable statement users to reach a conclusion and make a decision.

Answer 29

Relevance Principle

Question 30

The ___________ prescribes a system designed to fit the unique characteristics of the company: its personnel, activities and structure.

Answer 30

Compatibility Principle

Question 31

The ________ prescribes that the company's system should allow changes.

Answer 31

Flexibility Principle