Accounting Process: Chapter 3

Question 1

Three elements of the Statement of Financial Position

Answer 1

Assets, Liabilities, and Owner’s Equity

Question 2

Two elements of the Statement of financial Performance

Answer 2

Revenues and Expenses

Question 3

Economic resources owned and controlled by the business.

Answer 3

Assets

Question 4

An obligation to do or pay.

Answer 4

Liabilities

Question 5

Total liabilities - total assets = ?

Answer 5

Net assets or net worth

Question 6

The residual right or interest of the owner(s) is the entity’s net assets

Answer 6

Equity

Question 7

Accounting Equation

Answer 7

Assets = Liabilities + Owner’s Equity

Question 8

A device used to record the changes (increases or decreases) in the accounting elements.

Answer 8

Account

Question 9

An exchange of values between two parties expressed in monetary terms.

Answer 9

Transaction

Question 10

For every value received there is an equal value parted.

Answer 10

Double Entry Bookkeeping or Venetian Model

Question 11

The transaction must be stated on terms of money.

Answer 11

Monetary Measurement Principle

Question 12

All transactions should be properly documented

Answer 12

Objectivity Principle

Question 13

Financial Statement: a list of assets, liabilities, and owner’s equity of a business.

Answer 13

Statement of Financial Position or Balance Sheet

Question 14

Account title used for a liability presented by an oral promise to pay.

Answer 14

Accounts Payable

Question 15

Account title used when it is supported by a promissory note.

Answer 15

Notes Payable

Question 16

Qualitative Attributes: requires that users have a reasonable knowledge, terminologies used were clear, and the presentation of reports must be orderly.

Answer 16

Understandability

Question 17

Qualitative Attributes: prescribes the quality of information that will make a difference and influence a statement user to make a meaningful decision.

Answer 17

Relevance

Question 18

________ will depend whether an item will influence the user’s decision or not.

Answer 18

Materiality

Question 19

Reports must be given promptly or within the period it is needed to form judgment else it loses its usefulness.

Answer 19

Timeliness

Question 20

Qualitative Attributes: the financial statements should be dependable.

Answer 20

Reliability

Question 21

The information should not mislead users to think that it is when it is not.

Answer 21

Faithful Representation

Question 22

If the substance or economic reality (intention) of the contract is not consistent with the legal form, the economic reality should prevail.

Answer 22

Substance over form

Question 23

_______ requires that the information should be useful to all users.

Answer 23

Neutrality

Question 24

________ requires the accountant to exercise caution when using estimates or information that is marked by uncertainty.

Answer 24

Prudence

Question 25

All information are provided taking into consideration the importance of each item to statement users.

Answer 25

Completeness

Question 26

Qualitative Attributes: helps one identify changes taking place in the entity between two or more periods.

Answer 26

Comparability

Question 27

_______ requires uniformity of accounting treatment from one period to another or from one entity to another.

Answer 27

Consistency

Question 28

_________ are laws or rules that guide the conduct and practice if the profession.

Answer 28

Principles

Question 29

True or False: Only data measurable in terms of money are recognized and recorded in the books of the entity.

Answer 29

True

Question 30

A business enterprise is separate and distinct from its owner or investor.

Answer 30

Business Entity Concept

Question 31

Assets, liabilities, revenues and expenses should be recorded based on cost.

Answer 31

Exchange price or Cost Principle

Question 32

Based on this premise, it is expected that the business will continue to exist indefinitely.

Answer 32

Going Concern Assumption

Question 33

Assets, liabilities, revenues or expenses should be recognized based on the period they relate or based on the occurrence of the transaction/event rather than based on cash received or paid.

Answer 33

Accrual Assumption

Question 34

Assets acquired must be verifiable and substantiated by documents.

Answer 34

Objectivity

Question 35

What is the basic accounting period?

Answer 35

1 year