Chapter 1 Flashcards
Introduction to Accounting (TRUE OR FALSE)
The main purpose of accounting is to provide formation that is useful in making economic decisions.
True
All business transactions are recorded in the books of accounts.
False
Only accountable events
Accounting information is expressed both in numbers (e.g., monetary amount) and in words (e.g., descriptions and explanatory information).
True
Accounting is considered a practical art because it requires the use of creative skills and judgment.
True
Accounting, is an information system, consists of an input, a process and an output.
True
Although bookkeeping is part of accounting, the two are not the same.
True
Entity A buys goods and sells them at a mark-up. Entity A is a merchandising business.
True
Entity B is required to file audited annual financial statements with the SEC. Entity B can either be a corporation or a partnership, but not a sole proprietorship or a cooperative.
True
A school is most likely to be considered a manufacturing business - the raw materials are the students, and the finished products are responsible and competent business professionals.
False
School is a service business
A business that produces goods in large quantities can save on fixed costs. This is called economies of scales.
True
Only accountable events are recorded in the books of accounts. Accountable events are those affect the accountant.
False
Accountable events are those affect the accounting equation of the busin
General purpose financial statements are the end product of the financial accounting process. These statements are intended for internal users.
False
These statements are intended for external users.
Accounting is the major facet of a business that is responsible in generating funds to support the business operations.
False
Finace is the responsible for generating funds.
A business transaction is considered an accountable event if it affects the assets, lianblities, equity, income or expense of the business.
True
You and your friend are members in a cooperative. You hold 1 share, while your friend holds 10,000 shares. During members’ meetings, your friend can cast 10,000 votes, whereas you can only cast 1 vote.
False
You and your friend are members in a corporation.
Mr. A owns and manages a sole proprietorship business. The financial reports prepared tailored to Mr. A’s financial informaton needs are not general purpose financila statements.
True
Not general = specific
Mr. A (in #16 above) accepts Mr. B as co-owner to his business. The business is now called A&B Co. The business of Mr. A and Mr. B is a partnership.
True
Mrs. C a taxi and jeepney operator. Mrs. C has three taxis and five jeepneys. Mrs. C’s business is registered with the DTI. Mrs. C’s business is a corporation.
False
Mrs. C’s business is a sole proprietorship.
Mr. A and Mr. B in #17 above decided to acquire the business of Mrs. C in #8. The newly formed business is called ABC, Inc. ABC, Inc. is owned by Mr. A, Mr. B, Mrs. C and two drivers of Mrs. C. ABC, Inc. issued shares of stocks to the owners representing their ownership interest in the business. The newly formed business is a partnership.
False
The newly formed business is a corporation.
The word “Inc.” in ABC, Inc. (see #19 above) is the abbrevation for incorporated, which connotes a corporate business.
True
