ACTG121 Sole Prop Prelims Flashcards
1
Q
is a process of identifying, recording and communicating economic information that is useful in making economic decisions.
A
Accounting
2
Q
Is a service activity, its function is to provide quantitative information, primarily financial in nature.
A
Accounting
3
Q
Is process of identifying, measuring and, communicating economic decisions by users of information.
A
Accounting
4
Q
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.
A
Accounting
5
Q
Information system that measures, processes and communicates financial information about an identifiable economic entity.
A
Accounting
6
Q
is a process with the basic purpose of providing information about economic activities that is intended to be useful in making economic decisions.
A
Nature of Accounting
7
Q
Father of Modern Accounting
A
Fra Luca Pacioli 1494
8
Q
Who published “Summa Arithmetica Geometria Proportioni and Proportionista” on Nov 14 1494 and who introduced double entry system?
A
Fra Luca Pacioli
9
Q
Does FINANCIAL STATEMENTS for the external users for its General Purpose (Branches of Accounting)
A
Financial Accounting
10
Q
Uses FINANCIAL REPORT for internal users for its specific purpose (Branches of Accounting)
A
Management Accounting
11
Q
The Government organizations (Branches of Accounting)
A
Government Accounting
12
Q
Inspection of entity’s financial statements if it corresponds to its business criteria (Branches of Accounting)
A
Auditing
13
Q
Gives tax advice and files income tax returns (Branches of Accounting)
A
Tax Accounting
14
Q
Failure to file tax returns (Branches of Accounting)
A
Tax Accounting
15
Q
Violation is imprisonment for not less than 6 & not more than 10 years (Branches of Accounting)
A
Tax Accounting
16
Q
Systematic Recording & Analyzing of cost of material, labor, etc. that is related to manufacturing and service type of business
(Branches of Accounting)
A
Cost Accounting
17
Q
The Academy (Branches of Accounting)
A
Accounting Education
18
Q
Looks into economic events and analyzes it to make better economic decisions (Branches of Accounting)
A
Accounting Research
19
Q
Branches of Accounting (8)
A
- Financial Accounting
- Management Accounting
- Government Accounting
- Auditing
- Tax Accounting
- Cost Accounting
- Accounting Education
- Accounting Research
20
Q
Types of Business Activities (3)
A
- Service
- Merchandising
- Manufacturing
21
Q
- Registered under DTI (DEPARTMENT OF TRADE AND INDUSTRIES)
(Types of Business Organization)
A
Sole Proprietorship
22
Q
- Registered under SEC (SECURITIES EXCHANGE COMMISION)
- Formed by contracts
(Types of Business Organization)
A
Partnership
23
Q
- Formed by operation of law.
(Types of Business Organization)
A
Corporation
24
Q
- Registered under CDA (COOPERATIVE DEVELOPMENT AUTHORITY)
(Types of Business Organization)
A
Cooperative
25
- Directly involved in managing the business
Internal Users
26
- NOT directly involved in managing the business
External Users
27
Types of Information provided by Accounting
- Qualitative Information
- Quantitative Information
- Financial Information
28
to provide information about an entity's economic resources.
Primary Objective
29
to provide information useful in ASSESSING the entity's management stewardship.
Secondary Objective
30
- is not a standard. Rather, the _______________________ serves as a general frame of reference in developing or applying the standards.
Conceptual Framework
31
-Personal money and your business money are separated.
-The business is viewed as a separate entity, distinct from its owner(s). Only the transactions of the business are recorded in the books of accounts. The personal transactions of the business owner(s) are not recorded.
Separate entity concept
32
Initially recorded at their acquisition cost.
Historical Cost Concept (Cost Principle)
33
- As if your business lives forever.
- The business is assumed to continue to exist for an indefinite period of time.
Going concern
34
Some costs are initially recognized as assets and charged as expenses only when the related revenue is recognized.
Matching Principle (C&E)
35
Inc & Exp Recog.
Accrual Basis of Accounting
36
Choosing the unfavorable outcome.
Prudence (or conservatism)
37
- Accounting period or Reporting period.
- Fiscal year & Calendar year are almost the same.
- Interim period (quarter 3 mos & semiannual 6 mos)
Time/Reporting Period
38
- Peso's purchasing power is regarded as stable.
- Convert other currencies in peso.
Stable monetary unit
39
- An item is material if its omission or misstatement could influence economic decisions.
- It is a matter of professional judgment and is based on the size and nature of an item being judged.
Materiality Concept
40
- Should not exceed the benefits to be derived from the information used.
Cost Benefit (Cost constraint)
41
- Related to Materiality & Cost Benefit Concepts
- Reflects a series of judgmental trade offs
- Sufficient detail to disclose matters that make a difference to users yet.
- Sufficient condensation to make the information understandable
Full Disclosure Principle
42
- Accounting policies used this year shall be the same used last year
- If it were to change, do it in the next accounting period or year
Consistency Concept
43
- Are the traits that determine whether an item of information is useful to others. Without these characteristics, information may be deemed unless.
QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION
44
- It is relevant if it can affect decision.
(Fundamental Qualitative Characteristics)
A. Relevance
45
- if it can help users to make predictions about future outcomes.
Predictive Value
46
- if it can help users confirm their past predictions.
Confirmatory Value
47
- is material if omitting it or misstating it could influence the decisions of users.
Materiality
48
- It represents the actual effects of events that have taken place
(Fundamental Qualitative Characteristics).
B. Faithful Representation
49
- All information necessary for users to have a complete understanding of the FS is provided
Completeness
50
information is selected or presented without bias
Neutrality
51
means the
information is not materially misstated.
Free from Error
52
- Information is comparable if it can help users identify similarities and differences between sets of information.
(Enhanced Qualitative Characteristics)
A. Comparability
53
- Information is verifiable if different users could reach a general agreement as to what the information intends to represent.
(Enhanced Qualitative Characteristics)
B. Verifiability
54
- Information is timely if it is available to users in time to be able to influence their decisions.
(Enhanced Qualitative Characteristics)
C. Timelines
55
- Information is understandable if it is presented in a clear and concise manner.
(Enhanced Qualitative Characteristics)
D. Understandability
56
- Regulating corporations it includes partnerships
- Requires them to file audited financial statements
Securities Exchange Commission (SEC)
57
- Task in Collecting national Taxes and Administering the provisions of the Tax Code.
- The provisions do at times reflect the choice of accounting methods and procedures .
Bureau of Internal Revenue (BIR)
58
FSRSC
Financial Sustainability Reporting Standards Council
59
PFRS
Philippine FInancial Reporting Standards
60
IFRS
International Financial Reporting Standards
61
- Tasked in regulating banks and other entities performing banking functions .
- BSP influences the selection and application of accounting policies by these business.
Bangko Sentral ng Pilipinas (BSP)
62
- Tasked in regulating cooperatives.
- CDA influences the selection and application of accounting policies by these businesses.
Cooperative Development Authority (CDA)
63
- are the characteristics that make information useful to users.
Fundamental Qualitative Characteristics
64
- are the characteristics that enhance the usefulness of information
Enhancing Qualitative Characteristics
65
Basic Accounting Equation
ASSET = LIABILITIES + EQUITY
66
Extended Accounting Equation
ASSET = LIABILITIES + EQUITY+INCOME-EXPENSE
67
FORMULA FOR ENDING CAPITAL
BEG CAPITAL = INCOME - EXPENSE
68
Short introduction of Obligations
- a duty or responsibility.
- Is under Liabilities
- To settle an obligation you should exchange your economic resource
- Liabilities as Obligations
- Assets as Economic Resource
69
- Supported by Law, Legislation, and Contracts
A. Legal Obligation
70
- Mere words and illustrations (w/o) contracts.
B. Constructive Obligation
71
- Already obtained economic benefits or taken an action, as a consequence, you are required to transfer an economic resource.
C. Present Obligation
72
- Is under Assets
- Don't necessarily need to own the economic resource.
Short introduction of Control
73
means you have the exclusive right to enjoy those benefits and the ability to prevent others from enjoying those benefits.
Control
74
The control over an economic resource have resulted from a past event or translation.
Past Event
75
is the basic storage of information in accounting
Accounting
76
THE 5 MAJOR ACCOUNTS
- Asset
- Liabilities
- Equity
- Income
- Expense
77
Economic Resources you control that resulted from past events and can provide you future economic benefits.
Asset
78
Present Obligations that have resulted from past events and can require you to give up resources when settling them.
Liablities
79
Asset minus Liabilities
Equity
80
Increases in economic benefits during the period in the form of increases in assets that in result increases equity.
Income
81
arises in the course of the ordinary activities of a business.
Revenue
82
represent other items that meet the definition of income and may or not may arise in the course of the ordinary activities.
Gains
83
Decreases in economic benefits during the period in the form of decreases in assets that in result decreases in equity.
Equity
84
arises in the course of the ordinary activities of a business.
Expenses
85
represents other items that meet the definition of expenses and may or not may arise in the same course of the ordinary business.
Losses
86
Varies depends on the type of business
Chart of Accounts
87
Banks chart of account should confirm to BSP Chart of Accounts.
BSP (Bangko Sentrol ng Pilipinas)
88
Cooperatives chart of account should conform to CDA Chart of Accounts.
CDA (Cooperative Development Authority)
89
- National Government Agencies MUST conform to (RCA) Revised Chart of Accounts issued by the (COA) Communion on Audit
COA (Commision on Audit)
90
The aggregate amount of estimated losses for uncollectible accounts receivable.
Short Introduction in Allowance for doubt/ bad debts accounts
91
- The portion of the cost of a depreciable asset
- Decreasing of value over time
- Ex. bldg., equipment, vehicle etc..
- Accumulated Depreciation - total amount of depreciation expenses recognized since the asset was acquired and made available for use.
Short Introduction in Depreciation expense
92
- “In & Out” sellers cost of delivering goods to customers.
- Other terms. Delivery expense, transportation cost, & carriage outwards.
- Contains tolls, gas, labor/rate of the worker.
Short Introduction in Freights
93
“Book of original entries”
Journal
94
Simplifies the recording process.
Special Journal
95
Record Sales on Account.
A. Sales Journal
96
Record Purchases of Inventory on Account.
B. Purchase Journal
97
Record all transactions involving receipts of cash.
C. Cash Receipts Journal
98
Record all transactions involving payment of cash.
D. Cash disbursement journal
99
If a business does not utilize special journals, all transactions are record in the general journal
General Journal
100
“Book of final entries”
Ledger
101
Provides breakdown of the balances of controlling accounts
A. Subsidiary Ledger
102
Consist of group of accounts, or balances that needed a breakdown.
a. Controlling Account
103
Contains all accounts appearing in the trial balance
B. General Ledger
104
Double-Entry system involves the use of the concepts of “Duality” and “Equilibrium”
Concept of Duality and Equilibrium
105
Views each transactions as having a two fold effect on values, a value parted with and value valued with, and each transaction is recorded using at least two accounts
A. The concept of duality
106
Requires that each transaction is recorded in terms of equal debits and credits. For every peso debited, there is a corresponding peso credited, and vice versa
B. The concept of equilibrium
107
of an account is on the side where an increase in that account is recorded
Normal Balance
108
Normal Bal increases, vice versa
Rules of debits, and credits
109
Deduction to their related account accounts
Contra Account
110
Increase to their related accounts
Adjunct Account
111
- Represents the steps or procedures used to record Transactions and prepare FS.
- The accounting cycle implements the accounting process of identifying, recording, and communicating economic information
Accounting Cycle
112
Gathers information and determines the effect of the transaction on the accounts
Analyzing
113
Accountable events are recorded in the journals
Journalizing
114
Information from journalizing is transferred to the ledger or T accounts
Posting to Ledger
115
Balances the Gen Ledger to prove that credit and debit is equal. Serves as basis for Adjusting Entries
Prep. Unadjusted Trial Balance
116
Updates the accounts as of the reporting date on an accrual basis by recording accruals, expiration of deferrals, estimations, and other events often not signaled by new source documents
Prep. Adjusting Entries
117
Trial Balance are rechecked after adjustments are made. This serves as the preparation of the Financial Statements.
Prep. Adjusted Trial Balance
118
these are the means by which information is processed is communicated to users
Financial Statements
119
Temporary Accounts or Nominal Accounts are closed and the resulting profit or loss is transferred to an equity account
Closing the Book
120
The equality of debits and credits are again rechecked after the closing pro
Post-Closing Trial Balance
121
Are usually made at the beginning of the next account period to simplify the recording of certain transactions in that period
Reversing Entries (opt)
122
Steps in Accounting Cycle
- Analyzing
- Journalizing
- Posting to Ledger
- Prep. Unadjusted Trial Balance
- Prep. Adjusting Entries
- Prep. Adjusted Trial Balance
- Financial Statements
- Closing the Book
- Post-Closing Trial Balance
- Reversing Entries (opt)
123
Sales of Goods
A. Sales Invoices (SI)
124
Rendering of Services
B. Officials' reports (OR)
125
a Document Issued by B or S, indicating types, quantities and agreed prices for Goods or Services.
C. Purchase orders
126
Document signed by the receiver of a shipment acknowledging the receipt of goods
D. Delivery receipts
127
Evidences a deposit to a bank account
E. Bank deposit slips
128
Is a report issued by a bank (on monthly basis) that shows the Deposits and Drawals during the period and cumulative balance of a depositor’s bank account
F. Bank Statements
129
Is an instrument that orders a bank (drawee) to pay the person named on the check or the bearer thereof (payee) a definite amount of money from the drawer’s bank account
G. Checks
130
Is a report that is sent to its customers listing the transactions with the customer during a period (Notice of Billing), Ex. Balance of tuition.
H. Statement of account, and the like
131
Identifying and Analyzing Transaction and Events
- Sales Invoices (OI)
- Officials' reports (OR)
- Purchase orders
- Delivery receipts
- Bank deposit slips
- Bank statements
- Checks
- Statement of account, and the like
132
are transactions that involve the business and another external party, Ex. includes Sales, Purchases, Borrowing, payment of liabilities,
External events
133
are events that do not involve an external party, Ex. Includes production, casualty losses
Internal Events
134
Types of Events
- External Events
- Internal Events
