BRIDGING 2

Question 1

WHAT: Income statement accounts are those accounts that are used in a firm’s profit and loss statement. These accounts are usually positioned in the general ledger after the accounts used to compile the balance sheet.

Answer 1

INCOME STATEMENT ACCOUNTS

Question 2

INCOME AND REVENUE(DEBIT): this represents revenue derived from the sale of merchandise.

Answer 2

Sales

Question 3

INCOME AND REVENUE(DEBIT): this is the account an income that is drawn by providing various professional services such as consulting, technical, or other services as part of a profession, trade or business.

Answer 3

Service Income

Question 4

INCOME AND REVENUE(DEBIT): the account title generally used by professionals for income earned from the practice of their profession.

Answer 4

Professional Income

Question 5

INCOME AND REVENUE(DEBIT): for income earned on buildings, space or other properties owned and rented out by the business as the main line of its activity.

Answer 5

Rental Income

Question 6

INCOME AND REVENUE(DEBIT): for income received by the business arising from an amount of money borrowed by a customer and is usually covered by a promissory note.

Answer 6

Interest Income

Question 7

INCOME AND REVENUE(DEBIT): for income earned by the business which is not the main line of its activity.

Answer 7

Miscellaneous Income

Question 8

EXPENSES(CREDIT): refers to direct costs in companies that make a product.

Answer 8

COST OF GOODS SOLD

Question 9

EXPENSES(CREDIT): is the term for direct costs when a business doesn’t make products, such as a retailer or wholesaler.

Answer 9

Cost of sales

Question 10

EXPENSES(CREDIT): interest expense is the total amount a business accumulates (accrues) in interest on its loans.

Answer 10

Interest Expense

Question 11

EXPENSES(CREDIT): the cost incurred by a business to utilize a property or location for an office, retail space, factory, or storage space.

Answer 11

Rent Expense

Question 12

EXPENSES(CREDIT): for expenses incurred in repairing or servicing the buildings, machineries, vehicles and equipment which are owned by the business.

Answer 12

Repairs and Maintenance Expense

Question 13

EXPENSES(CREDIT): the stationery, envelopes, clips, fasteners and etc..

Answer 13

Stationary and Office Supplies Expense

Question 14

EXPENSES(CREDIT): for compensation given to employees of a business.

Answer 14

Salaries Expense

Question 15

EXPENSES(CREDIT): an accounting entry that lists the amount of receivables your company does not expect to collect.

Answer 15

Bad Debts Expense

Question 16

EXPENSES(CREDIT): -is the amount that a company’s assets are depreciated for a single period ( quarter or the year).

Answer 16

Depreciation Expense

Question 17

EXPENSES(CREDIT): Amounts paid for taxes and licenses related to your business and other government dues.

Answer 17

Taxes and Licenses Expense

Question 18

EXPENSES(CREDIT): the amount that a company pays to get an insurance contract and any additional premium payments.

Answer 18

Insurance Expense

Question 19

EXPENSES(CREDIT): is the cost incurred by using utilities such as electricity, water, waste disposal, heating, and sewage.

Answer 19

Utilities Expense

Question 20

EXPENSES(CREDIT): account title for the employer’s share on SSS contribution.

Answer 20

SSS Contribution

Question 21

EXPENSES(CREDIT): account title for the employer’s share on Philhealth contribution.

Answer 21

Philhealth Contribution

Question 22

EXPENSES(CREDIT): the account title for the employer’s share on Pag-ibig contribution.

Answer 22

Pag-ibig Contribution

Question 23

EXPENSES(CREDIT): any amount paid as expense which is not significant enough to warrant a particular classification.

Answer 23

Miscellaneous Expense

Question 24

WHAT: the process of evaluating an economic entity’s proposed long-range projects or courses for future activity for the purpose of allocating limited resources to desirable projects.

Answer 24

Capital Budgeting

Question 25

WHAT: Are tangible and generally illiquid property which a business intends to use to generate revenue and expects its usefulness to exceed one year.

Answer 25

Capital Assets

Question 26

On a balance sheet, capital assets
are represented as __________

Answer 26

property, plant, and equipment (PP&E)

Question 27

Examples of Capital Assets

Answer 27

land, buildings, and machinery

Question 28

Importance of Capital Budgeting

Answer 28

1. Long Term Effect on Profitability
2. Huge Investments
3. Decision cannot be Undone
4. Expenditure Control
5. Information Flow
6. Helps in Investment Decision
7. Wealth Maximization
8. Risk and Uncertainty
9. Complicacies of Investment Decisions
10. National Importance

Question 29

PROJECT CLASSIFICATIONS: This category consist of expenditures necessary to replace worn-out or damaged equipment used to produce profitable products.

Answer 29

Replacement: Maintenance of Business

Question 30

PROJECT CLASSIFICATIONS: This category includes expenditures to replace serviceable but obsolete equipment. The purpose of these expenditures is to lower the costs of labor, materials, or other items such as electricity.

Answer 30

Replacement: Cost Reduction

Question 31

PROJECT CLASSIFICATIONS: This category includes expenditures to increase the output of existing products, or to expand outlets or distribution facilities in markets now being served.

Answer 31

Expansion of Existing Products or Markets

Question 32

PROJECT CLASSIFICATIONS: This category includes expenditures necessary to produce a new product or to expand into new geographic area, not currently being served.

Answer 32

Expansion Into New Products or Markets

Question 33

PROJECT CLASSIFICATIONS: This category includes expenditures necessary to comply with government orders, labor agreements, or insurance policy terms.

Answer 33

Safety and Environmental Projects

Question 34

PROJECT CLASSIFICATIONS: This catch-all category includes office buildings, parking lots, executive aircraft, ad so on.

Answer 34

Others

Question 35

THE CAPITAL BUDGETING PROCESS

Answer 35

1. Identifications of Potential Projects
2. Estimation of Cost and Benefits
3. Determine the Riskiness of the Projected Cash Flows
4. Development of the Project Proposal
5. Development of Capital Budget
6. Re-evaluation of Projects

Question 36

FACTORS AFFECTING CAPITAL BUDGETING DECISIONS

Answer 36

1. The number of cash outflows related to the investments.
2. The expected cash flow returns (inflows) on the investments.
3. The lowest acceptable rate of return the company must set before considering analyzing capital investment or hurdle rate or the minimum desired rate of return.