Bookkeeping Lec 2

Question 1

is a business activity concerned with recording and classifying financial data related to business operation in order of its occurrence.

Answer 1

Bookkeeping

Question 2

Uses only one entry in every transaction, similar to a check register.
Does not track assets and liabilities from transaction.
Applicable only to very small businesses with simple operations and low volume of activity.

Answer 2

Single-entry bookkeeping

Question 3

Used by most businesses.
Discussed in detail in the succeeding slides.

Answer 3

Double-entry bookkeeping

Question 4

Double-entry bookkeeping developed by?

Answer 4

Luca Pacioli in 1494

Question 5

Based on the principle of the duality of business transactions and events, i.e., every transaction has a double (or dual) effect on the position of a business as recorded in the accounts.

Answer 5

Double entry bookkeeping

Question 6

Step 2-4?

Answer 6

Bookkeeping phase

Question 7

step 5-7?

Answer 7

Reporting phase

Question 8

step 8-10

Answer 8

wrap up phase

Question 9

is defined as a summarized record of economic transactions related to the elements of the financial statement

Answer 9

account

Question 10

Accounts related to the entity’s assets, liabilities and owner’s equity
Balances are carried-over from one accounting period to another.
Also known as permanent accounts or balance sheet accounts.

Answer 10

Real account

Question 11

Accounts related to the entity’s revenues and expenses.
Balances are transferred to a real account at the end of an accounting period.
Also known as temporary accounts or income statement accounts.

Answer 11

Nominal Account

Question 12

Accounts that reduced the value of a related account.
The normal balance of these account will be the opposite of the related account (i.e., if asset account have normal debit balance, contra-asset accounts will have a normal credit balance).
Can either be a real account or nominal.

Answer 12

Contra Account

Question 13

“debere” “what we will receive”

Answer 13

debit

Question 14

“credere” “what we will have to pay”

Answer 14

credit

Question 15

is a listing of the names of the accounts that a company has identified and made available for recording transactions in its books of accounts.

Answer 15

chart of accounts

Question 16

Paper bill, check and any other medium that will be accepted in the exchange of goods or service.

Answer 16

cash

Question 17

Amount due to be collected by the entity from it s customer for service rendered or goods sold on credit.

Answer 17

accounts receivable

Question 18

A written pledge that a debtor will be pay the entity a fixed amount on a certain date.

Answer 18

notes receivable

Question 19

A contra-asset account representing a portion of the entity’s receivable that is assessed to be uncollectible.

Answer 19

allowance for doubtful accounts

Question 20

Goods that are held for sale in the ordinary course of business or used in production of goods and services.

Answer 20

inventories

Question 21

goods bought by trading firms for resale at a mark-up.

Answer 21

merchandise inventory

Question 22

goods to be used in making a finished goods by a manufacturing firm.

Answer 22

raw materials inventory

Question 23

inventories in the manufacturing line bur not yet completed.

Answer 23

work-in-process inventory

Question 24

inventories completed from the manufacturing process for sales.

Answer 24

finished goods inventory

Question 25

inventory of other supplies used in the production goods and services.

Answer 25

production supplies

Question 26

Represents cash paid by the entity to its supplier of goods or service that is yet to incurred used or consumed by the entity and , hence, yet not incurred by the entity.

Answer 26

prepaid expenses

Question 27

Tangible properties that are held by an enterprise for use in the production or supply of goods or services, rental to other or use for administrative purposes that is expected to be useful within for more than one year. Includes items such as land, building, machinery and equipment, furniture and fixture and vehicles.

Answer 27

property, plant and equipment

Question 28

A contra-asset account related to an item of fixed asset and contains the accumulated sum of periodic depreciation charges. The balance of this account is deducted from the cost of the related asset (e.g. building, equipment, vehicle) to obtain its net book value or carrying value.

Answer 28

accumulated depreciation

Question 29

Amount due to be paid by the entity to its supplier for services rendered or good received on credit.

Answer 29

accounts payable

Question 30

Amount owed to other for unpaid expense where the supplier’s billing or other supporting document are still not yet received by the entity.

Answer 30

accrued expenses payable

Question 31

Represents cash received by the entity from its customer prior to rendering of service or delivery of goods, hence, still not earned by the entity.

Answer 31

unearned revenues

Question 32

Represents cash obtained through debt financing from a bank or other financial institution. Loans payable can also be called as: Short-term loan payable, if it is due to be paid within one year, or Long-term loan payable, if it is due to be paid for a period exceeding one year.

Answer 32

loans payable

Question 33

Pertains to the owner’s invested capital and accumulated profit (loss), net of withdrawals closed in this account.

Answer 33

owner, capital

Question 34

Contra-equity account; Temporary account used to record withdrawals of business asset by the owner for personal purposes.

Answer 34

owner, withdrawals

Question 35

Revenue earned by performing services for a customer or client; for example, accounting services by a CPA firm, legal services by a law firm

Answer 35

service revenue

Question 36

Revenues earned as a result of sale of goods, for example, sale of building materials by a construction supply firm

Answer 36

sales

Question 37

Revenue earned that is incidental to the operations of the business, for example, interest income earned on cash in bank

Answer 37

other revenues/ income

Question 38

Revenue earned from activities outside of the normal course of business, for example, gain on sale of fixed assets sold for more than its carrying value.

Answer 38

gains

Question 39

Expenditure spent by the entity that is directly related in earning service revenues; for example, salaries of CPAs hired by an accounting firm or the fuel consumed and salary of the drivers of a bus company.

Answer 39

direct cost

Question 40

Cost assigned to goods sold by a trader or manufacturer. This account is used in the perpetual inventory system only.

Answer 40

cost of sales

Question 41

Accumulated cost of goods purchased by a trading firm from suppliers. This account is used in the periodic inventory system only.

Answer 41

purchases

Question 42

Payments made as a result of an employer-employee relationship between the entity and its employees.

Answer 42

salaries and wage expense

Question 43

Expenses related to use of telecommunication facilities, consumption of electricity or water.

Answer 43

utilities expense

Question 44

Expense for leasing office space, equipment or other assets.

Answer 44

rent expense

Question 45

Expense of using office supplies in the conduct of routing business activities

Answer 45

office supplies expense

Question 46

Payment of premium on insurance coverage of the entity’s assets.

Answer 46

insurance expense

Question 47

Portion of a tangible asset allocated or charged as expense during an accounting period.

Answer 47

depreciation expense

Question 48

Amount of receivable estimated to be doubtful of collection and charge as expense during the period.

Answer 48

bad debts expense

Question 49

Expense related to the use of borrowed funds.

Answer 49

interest expense

Question 50

Outflow of economic resource that is outside of the normal of course business.

Answer 50

losses