Chapter 1

Question 1

We need accounting because…

Answer 1

it’s the only way for business to grow and flourish.

Question 2

backbone of the business financial world.

Answer 2

Accounting

Question 3

Inventor of double-entry bookkeeping.

Answer 3

Amatino Manucci

Question 4

He managed to construct a comprehensive and fully-articulated set of double-entry records, with a regular balancing procedure on closure of the general ledger.

Answer 4

AmatinoManucci

Question 5

A Franciscan friar and a celebrated mathematician, is generally associated with the introduction of double-entry bookkeeping.

Answer 5

Luca Pacioli

Question 6

He has been regarded as the father of accounting.

Answer 6

Luca Pacioli

Question 7

He stated that the purpose of bookkeeping was to give the trader without the delay information as to his assets and liabilities.

Answer 7

Luca Pacioli

Question 8

“Accounting is 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 result thereof.”

Answer 8

American Institute of Certified Public Accountants (Year 1961)

Question 9

“The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of accounting”.

Answer 9

American Accounting Association (Year 1966)

Question 10

is a service activity

Answer 10

Accounting

Question 11

Function: provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.

Answer 11

Accounting

Question 12

Accounting is a ____________ with a body of knowledge which has been systematically gathered, classified, and organized. It is influenced by, and interacts with, economic, social and political environments.

Answer 12

social science

Question 13

Accounting is a ____________ which requires the use of creative skill and judgment.

Answer 13

practical art

Question 14

(Fixed, inflexible, organized and systematic)

Answer 14

social science

Question 15

(Opinionated, flexible and subjective)

Answer 15

practical art

Question 16

Accounting identifies and measures economic activities, processes information into financial reports and communicates these reports to decision makers.

Answer 16

Accounting as an information system

Question 17

What are the 6 economic activities?

Answer 17

Production, exchange, income distribution, consumption, investment, savings

Question 18

the process of converting economic resources into outputs of goods and services that are intended to have greater utility than the required inputs.

Answer 18

Production

Question 19

the process of trading resources or obligations for other resources or obligation.

Answer 19

Exchange

Question 20

the process of allocating rights to the use of output among individuals and groups in society.

Answer 20

Income distribution

Question 21

the process of using the final output of the production process.

Answer 21

Consumption

Question 22

the process of using current inputs to increase the stock of resources available for output as opposed to immediately consumable output.

Answer 22

Investment

Question 23

the process by which individuals and groups set aside rights to present consumption in exchange for rights to future consumption.

Answer 23

Savings

Question 24

What are the 3 types of information provided by accounting?

Answer 24

quantitative, qualitative, financial information

Question 25

expressed in numbers, quantities or units.

Answer 25

Quantitative

Question 26

expressed in words or descriptive form.

Answer 26

Qualitative

Question 27

expressed in terms of money

Answer 27

Financial information

Question 28

a separately identifiable combination of persons and property that uses or controls economic or scarce resources to achieve certain goals or objectives. Scarce resources have no significant characteristics.

Answer 28

Economic entity

Question 29

one that carries out some socially desirable needs of the community or its members whose activities are not directed towards making profit.

Answer 29

Not-for-profit or non-profit entity

Question 30

an entity that produces and distributes goods or services primarily for profit.

Answer 30

Business entity

Question 31

What are the 3 functions of accounting?

Answer 31

Identification, measurement, communication (recording, classifying, summarizing)

Question 32

The accounting process of recognition or non-recognition of business activities as accountable events or whether has accounting relevance.

Answer 32

Identification

Question 33

One that is quantifiable and has an effect on assets, liabilities and equity. This also known as economic activity, which is the subject matter of accounting.

Answer 33

Accountable events

Question 34

The accounting process of assigning of peso amounts or numbers to the economic transactions and events.

Answer 34

Measurement

Question 35

The accounting process of preparing and distributing accounting reports to potential users of accounting information and interpreting the significance of this processed information.

Answer 35

Communication

Question 36

The process of systematically committing to writing business transactions and events after they have been identified and measured, in books of account in a systematic and chronological manner according to accounting rules.

Answer 36

Recording

Question 37

The grouping of similar and interrelated items into their respective classes.

Answer 37

Classifying

Question 38

Putting together or expressing in condensed or brief form the recorded and classified statements in financial statements.

Answer 38

Summarizing

Question 39

What are the 10 branches of accounting or the 10 areas of specialization

Answer 39

1. financial accounting 2. auditing 3. management accounting 4. financial management 5. taxation/tax accounting 6. government accounting 7. fiduciary accounting 8. social responsibility 9. environmental accounting 10. price-level accounting

Question 40

The recording of transactions, preparation of financial statements and communication of financial information to external user groups. Focuses on general purpose reports.

Answer 40

Financial accounting

Question 41

The examination of financial statements by independent certified public accountant for the purpose of expressing an opinion on the fairness of presentation of financial statements.

Answer 41

Auditing

Question 42

Incorporates cost accounting data and adapts them for specific decisions which management may be called upon to make.

Answer 42

Management accounting

Question 43

accounting system that incorporates all types of financial and non-financial information from a wide range of sources.

Answer 43

Management accounting

Question 44

responsible for setting financial objectives, making plans based on those objectives, obtaining the finance needed to achieve the plans, and generally safeguarding all the financial resources of the entity.

Answer 44

Financial managers

Question 45

Involves the preparation of tax returns and rendering of tax advice, such as determination of tax consequences of certain proposed business endeavors.

Answer 45

Tax acctng

Question 46

Accounting for the national government and its instrumentalities, focusing attention on the custody of public funds and the purpose or purposes to which such funds are committed.

Answer 46

Government acctng

Question 47

Handling of accounts managed by a person entrusted with the custody and management of property for the benefit of another.

Answer 47

Fiduciary acctng

Question 48

Reporting of programs and projects that have to do with the upliftment of the welfare of the people of a community or of the nation.

Answer 48

Social responsibility

Question 49

The area of accounting that focuses on programs, activities and projects that are focused care for Mother Earth.

Answer 49

Environmental acctng

Question 50

Otherwise known as Accounting for Hyperinflationary Economies – simply defined, is accounting that recognizes in the financial statements changes in the purchasing power of money.

Answer 50

Price-level acctng

Question 51

List all internal users of acctng information

Answer 51

1. Managers 2. Employees 3. Officers 4. Internal auditors

Question 52

List all external users of acctng information

Answer 52

1. Investors 2. Lender 3. Suppliers 4. Customers 5. Government 6. Public

Question 53

those who make decisions directly affecting the internal operations of the business.

Answer 53

Internal users

Question 54

directly involved in operation of the business. They need accounting data to improve the efficiency and effective of the organization.

Answer 54

Managers

Question 55

use financial data to assess whether they are receiving the right compensation and to check if they bargain for higher remuneration, retirement benefits and employment opportunities.

Answer 55

Employees

Question 56

also called as the company executives who are interested to know if the company is doing well in its operation so they can plan for possible expansion or branching out to widen its geographical and demographic market.

Answer 56

Officers

Question 57

there role is to protect and safeguard the resources of the company against fraud or irregularities.

Answer 57

Internal auditors

Question 58

The act of making money by making people believe something which is not true.

Answer 58

Fraud

Question 59

individuals or enterprises that have financial interest in the business but they are not involved in the day activities of the organization.

Answer 59

External users

Question 60

(The providers of risk capital) are interested in information which enables them to assess the ability of the enterprise to pay dividends. They need information on whether they should buy, hold or sell their shares in.

Answer 60

Investors

Question 61

are interested in information that enables them to determine whether their loans, and their interest attaching to them will be paid when due.

Answer 61

Lenders

Question 62

interested in information that enables them to determine whether amount owing to them will be paid when due.

Answer 62

Suppliers and other trade creditors

Question 63

interested in the quality of goods and services that they are getting from the entity.

Answer 63

Customers

Question 64

they require information in order to regulate the activities of the enterprise, determine taxation policies and as a basis for national income and similar activities.

Answer 64

Government

Question 65

they are assisted by information through financial statements about the trend and recent developments in the prosperity of the enterprise and the range of its activities.

Answer 65

Public

Question 66

is a science and art of correctly recording in books-of accounts all those business transactions that result in transfer of money or money’s worth’.

Answer 66

As defined by Carter, ‘Book-keeping

Question 67

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

Answer 67

Book-keeping

Question 68

Book-keeping is a mechanical task which involves:

Answer 68

*Collection of basic financial information. *Identification of events and transactions with financial character i.e., economic transactions. *Measurement of economic transactions in terms of money. *Recording financial effects of economic transactions in order of its occurrence. *Classifying effects of economic transactions. *Preparing organized statement known as trial balance.