Basic Accounting - theories & meanings

Question 1

a legally-recognized organizational entity existing within an economically free country designed to sell goods and/or provide
services to consumers

Answer 1

Business

Question 2

Aims to earn income or profit through the provision of goods

and/or services to consumers

Answer 2

Profit-oriented enterprise

Question 3

Aims to achieve socio-civic or charitable aims

Answer 3

Non-profit-oriented enterprise

Question 4

Forms of Business Enterprises (according to nature of operations)

Answer 4

1. Service business or service concern-
2. Merchandising business or trading concern
3. Manufacturing business or manufacturing concern-

Question 5

Simplest form of business and provides services to clients or customers in exchange for fees, rent, interest, or royalties

Answer 5

Service business or service concern-

Question 6

Purchase goods from suppliers and, without altering the state of the goods bought, sell the same at a higher price than cost

Answer 6

Merchandising business or trading concern

Question 7

Involves the most complex activities and actually

produces the goods that it sells to customers

Answer 7

Manufacturing business or manufacturing concern

Question 8

LEGAL FORMS of Business/ Business Ownership

Answer 8

Sole Proprietorship
Partnership
Corporation
Cooperatives

Question 9

Defined by International Cooperative Alliance’s Statement on
Cooperative Identity as “autonomous associations of persons united voluntarily to meet their common economic, social,
and cultural needs and aspirations through jointly owned and democratically controlled enterprises”

Answer 9

Cooperatives

Question 10

Most complex form of Business Organizations

Answer 10

Corporation

Question 11

Person who invests in a corporation

Answer 11

Shareholder

Question 12

Evidence of the number of shares purchased Governed by the Corporation Code of the Philippines Management of operations of the corporation is centralized in the corporation’s board of directors

Answer 12

Certificate of stock

Question 13

An association of two or more persons who bind themselves to
contribute money, property, or industry to a common fund with the intention of dividing the profits among themselves.
- Partnerships are governed by the Civil Code of the Philippines

Answer 13

Partnership

Question 14

Most basic legal form of business and has only one owner

Answer 14

Sole Proprietorship

Question 15

Decisions which affect the resources it controls and the obligations of the business to other enterprises

Answer 15

Economic decisions

Question 16

A summary of all the transactions of the business over a period of time. Most important financial information comes from accounting

Answer 16

Financial information

Question 17

the 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 (Institute of Certified Public Accountants)

Answer 17

accounting

Question 18

Is a service activity. Its function is to
provide quantitative information,
primarily financial in nature, about
economic entities, that is intended to
be useful in making economic
decisions (Accounting Standards Council)

Answer 18

accounting

Question 19

Service function to management. It
basically processes raw data and
converts them to meaningful
information that will be useful for
decision-making

Answer 19

accounting

Question 20

Is the process of identifying, measuring
and communicating economic
information to permit informed
judgement and decision by users of
the information (American Accounting Association)

Answer 20

accounting

Question 21

to supply
financial information to users of the information
to help them make informed judgements and
better decisions

Answer 21

Basic purpose of Accounting

Question 22

procedural or mechanical aspect
of accounting and involves set-up, update and
maintenance of accounting records. It can be
done by properly trained non-accountants

Answer 22

bookkeeping

Question 23

interpretation of information
recorded under bookkeeping. Practice of
accountancy can be done only by certified public
accountants

Answer 23

accounting

Question 24

Republic Act of Accountancy

Answer 24

Republic Act No. 9298, the Philippine Accountancy Act of 2004

Question 25

creates Professional Regulatory Board of Accountancy which enforces the provisions of the Philippine Accountancy Act. It is also granted the right to issue, suspend, revoke or reinstate CPA certificates for the practice of the profession

Answer 25

Article II

Question 26

Candidates who fail _________ examinations shall be disqualified from taking another exam unless they submit evidence to the satisfaction of the Board that they enrolled an completed at least 24 units of subject given in the licensure examination

Answer 26

2 complete examinations

Question 27

Sectors of Accounting practice

Answer 27

Public Practice Commerce or Industry Education Government

Question 28

This sector includes individual practitioners, small accounting firms, medium sized and multinational accounting firms that render independent professional accounting services to the public. CPAs charge professional fees for these services. Examples are the Auditing, Tax services and Management and consulting services

Answer 28

Public Practice

Question 29

``` most common service provided by CPAs and involves independent examination of financial statements for the purpose of expressing an opinion on the fairness of these statements ```

Answer 29

Auditing

Question 30

includes the preparation of tax returns for various clients, provision advice on tax matters and representation of clients in tax cases

Answer 30

tax services

Question 31

``` involves providing advisory/consulting services on matters of accounting, finance, business policies, organization procedures, budgeting, product costing and the conduct of operations ```

Answer 31

management and consulting services

Question 32

``` Accountants are employed in various positions such as: vice-president for finance, chief accountant, cost accountant, internal auditor or budget officer. The highest accounting officer of a business organization is known as the controller. Accountants in commerce and industry assist management in planning and controlling a company’s operations ```

Answer 32

Commerce and Industry

Question 33

This area employs accountants as professors, reviewers or researchers. They take steps to clarify and address emerging accounting issues encountered by accountants in other sectors. They share results of discussion and research with colleagues in other sectors. Educators also prepare aspiring CPAs for the Licensure Examinations

Answer 33

Education

Question 34

``` Accountants may be hired as staff, auditor, budget officer or consultant in government units like the Commission on Audit, Bureau of Internal Revenue, Department of Finance, Department of Budget and Management, and the Securities and Exchange Commission ```

Answer 34

Government

Question 35

he wrote a book containing discussions on the double- entry bookkeeping system entitled Summa de Arithmetica, Geometria, Proportioni et Proportionalita (Everything about Arithmetic, Geometry, Proportions and Proportionality), summary of the existing mathematical knowledge at the time. Considered as Father of Double-Entry Bookkeeping

Answer 35

1494, Friar Luca Pacioli

Question 36

Fields of Accounting

Answer 36

``` Financial Accounting Management Accounting Cost Accounting Tax Accounting Government Accounting ```

Question 37

``` encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving receipt and disposition of government funds and property and interpreting the results thereof. Focus is the proper custody, disposition and accounting for public funds ```

Answer 37

Government accounting

Question 38

has two aims: compliance with tax laws and minimizing the company’s tax bill through legal means

Answer 38

tax accounting

Question 39

measures a business’ costs to help management in controlling expenses

Answer 39

cost accounting

Question 40

``` concerned with financial reporting for internal users (management) and users have control over the accounting system and can specify precisely the type of reports needed for use in decision-making ```

Answer 40

management accounting

Question 41

focuses on preparation of general-purpose financial statements with the aim of meeting most of the needs of the external users

Answer 41

financial accounting

Question 42

comprises the accounting principles and processes, standards and underlying assumptions that are used in preparing financial statements

Answer 42

Generally Accepted Accounting Principles (GAAP)

Question 43

official accounting standard setting body in the Philippines. The primary task of FRSC is to improve and establish accounting standards that will be generally accepted in the Philippines

Answer 43

Financial Reporting Standards Council (FRSC)

Question 44

The FRSC issued this and this constitutes the generally accepted accounting standards observed in the Philippines

Answer 44

Philippine Financial Reporting Standards | PFRS

Question 45

PFRS includes

Answer 45

Philippine Accounting Standards PFRS Philippine Interpretations developed by Philippine Interpretations Committee