Chapter 1-4 Flashcards
Accountancy is not only one of the modest, less expensive but also the most prestigious profession in the country today. (True/False)
True
lt was in 1923 that accountancy profession was first recognized through the passing of the accountancy law. (True/False)
True
Until today, the accountancy profession maintains the highest mortality rate among courses that require board examinations. (True/False)
True
Accountancy is the first among the professions here in the Philippines to be included under the World Trade Organization’s policy liberalization of services. (True/False)
True
Accountancy is considered a profession because it has a body of principles, assumptions and a set of ethical standards. (True/False)
True
Republic Act 7160 which is known as the “Local Government Code of 1991” created cities, provinces and municipalities as Local Government Units. (True/False)
True
The Board of Accountancy employs strictness, whereby before a CPA can engage into public practice, he has to obtain accreditation with Professional Regulatory Commission and Board of Accountancy. (True/False)
True
AlI CPAs employed in the government agencies are considered as public practitioners. (True/False)
False
The knowledge of accounting is important and beneficial to those who are engaged in business only. (True/False)
False
A CPA who is teaching in the subjects of taxation in a college or university is not considered to be in the exercise of profession. (True/False)
False
A CPA is not allowed by law to engage in any lawful business activity if he is a public practitioner. (True/False)
False
R. A. 9298 known as “Philippine Accountancy Act of 2004” repealed P.D. 692 formerly known as the “Revised Accountancy Law”. (True/False)
True
The Board of Accountancy shall be composed of a chairman and 6 members to be appointed by the President of the Philippines. (True/False)
False
The purpose of the CPA Board Examination is to test the overall knowledge and competence of the candidates. (True/False)
True
Under the new accountancy law, the Professional Regulatory Commission, subject to the approval of the Board of Accountancy may revise or exclude any of the subjects in their syllabi and add new ones as the need arises. (True/False)
False
To be qualified as having passed the CPA Board Exam, the candidate must obtain a general average of 75% and above with no grades lower than 65% in any given subject. (True/False)
True
A conditional candidate shall automatically become a CPA two years after without taking examinations on the remaining subjects that he/she failed. (True/False)
False
Any candidate who failed in 2 complete CPA Board shall be disqualified from taking another set of examination unless he/she has enrolled and completed at least 24 units of subject given in the licensure examination. (True/False)
True
The Philippine Financial Reporting Standards Council is the new standard setting-body which is tasked to establish and improve the Generally Accepted Accounting Principles in the Philippines. (True/False)
True
The objective of international Accounting Standard is to achieve uniformity in the accounting principles which are used by business and other organizations for financial reporting around the world. (True/False)
True
When was the year that accountancy profession was first recognized through the passing of accountancy law?
1923
It is in this field of professional practice where CPAs are considered as ‘independent entity” vested with freedom to exercise his own judgment and impartiality of the reports he prepared -
Public Accounting
A CPA who chooses to join in the academe as a university professor, CPA Reviewer, Researcher, etc. is a member of what sector-
Association of CPAs in Education
Many accountants are employed in business enterprise as chief accountant or comptroller. Said accountants are engaged in-
Private Accounting
The accredited national professional organization of CPAs is-
Philippine Institute of CPAs
A CPA in public practice who is engaged in the design and installation of general accounting system is said to be performing a/an-
management services work
A CPA in public practice who carefully examines, tests and checks accuracy of accounting data -
Auditor
A CPA in public practice who examines financial statements and renders opinion that is free from bias is said to be engaged in-
auditing
Presidential Decree 692 which was previously known as the “Revised Accountancy Law” which was re-enacted May 5, 1975 was repealed by the Republic Act No. 9298 is known as-
Philippine Accountancy Act of 2004
The CPA Board Examination covers how many subjects?
6 subjects
The Board of Accountancy shall be composed of a chairman and how many members?
5 members
The Board of Accountancy shall elect a Vice Chairman from among its member, for the term of
1 year
Any person applying for examination shall establish the following requisites & the satisfaction of the Board that he/she -
a. is a Filipino citizen
b. has good moral character
c. a has not been convicted of any criminal offense involving moral turpitude
d. all of the above
d. all of the above
How many calendar days that the Board of Accountancy shall submit to the Professional Regulatory Commission the ratings that the candidate obtained during the board exam?
10 calendar days
A conditioned candidate, shall take an examination in the remaining subjects-
Within 2 years of the preceding examination.
The new standard-setting body created in 2005 to replace the Accounting Standards Council (ASC)-
Financial Reporting Standards Council
Due to the creation of FRSC, the Accounting Standards Council’s Statement of Financial Accounting Standards (SFAS) are now being renamed as-
Philippine Accounting Standards
The chairman of the Philippine Financial Reporting Standards Council (PFRSC) must have been or presently a-
a senior accounting practitioner
What do you call the approved statements of the International Accounting Standards Board (IASB)?
International Financial Reporting Standards
The members of the Professional Regulatory Board of Accountancy shall be appointed by the-
President of the Philippines
Which of the following is not a qualification of an applicant for the CPA licensure examination?
a. He/she is of good moral character
b. He/she is at least 21 years of age
c. He/she is a Filipino citizen
d. He/she is a holder of the degree of Bachelor of Science in Accountancy
b. He/she is at least 21 years of age
Which of the following statements is correct?
a. The examination in which the candidate was conditioned and the removal examination on the subject in which he/she failed shall be counted as two (2) complete examination.
b. Any candidate who fails in two (2) complete CPA board examinations u no longer be allowed to take another set of examinations.
c. Any candidate who fails in two (2) complete CPA board examinations shall be disqualified from taking another set of examinations unless he/she submits evidence to the satisfaction of the Board that he/she enrolled in and completed at least twenty-four (24) units of subjects given in the licensure examination.
d. None of the above
c. Any candidate who fails in two (2) complete CPA board examinations shall be disqualified from taking another set of examinations unless he/she submits evidence to the satisfaction of the Board that he/she enrolled in and completed at least twenty-four (24) units of subjects given in the licensure examination.
Which among the following is the work of a public practitioner which has a purpose of expressing an opinion on financial statements?
a. taxation
b. management advisory services
c. external auditor
d. internal auditor
c. External auditor
A professional accountant in public practice is prohibited from divulging any confidential information as a result of professional and business relationship to third parties without specific authority from the management.
Confidentiality
A professional accountant should not allow bias, conflict of interest or under influence of others to override professional or business judgments.
Objectivity
salaries paid to house helpers
(Identifying the Business Transactions and Events)
✅ or ❌
❌
bought rice and fish for family consumption
(Identifying the Business Transactions and Events)
✅ or ❌
❌
repair of a car owned by business
(Identifying the Business Transactions and Events)
✅ or ❌
✅
salaries paid to employees
(Identifying the Business Transactions and Events)
✅ or ❌
✅
the store was robbed by bad elements
(Identifying the Business Transactions and Events)
✅ or ❌
✅
Incurred inventory loss due to theft and robbery
(Identifying the Business Transactions and Events)
✅ or ❌
✅
tuition fees for the children
(Identifying the Business Transactions and Events)
✅ or ❌
❌
payment of personal accident insurance
(Identifying the Business Transactions and Events)
✅ or ❌
❌
repair of an old ancestral house used by business
(Identifying the Business Transactions and Events)
✅ or ❌
✅
a store building was razed by fire
(Identifying the Business Transactions and Events)
✅ or ❌
✅
payment of family’s medical expenses
(Identifying the Business Transactions and Events)
✅ or ❌
❌
salary of a family driver
(Identifying the Business Transactions and Events)
✅ or ❌
❌
Cash withdrawn from the business
(Identifying the Business Transactions and Events)
✅ or ❌
✅
supplies personally purchased by the manager for business use
(Identifying the Business Transactions and Events)
✅ or ❌
✅
payment of a personal loan to a bank
(Identifying the Business Transactions and Events)
✅ or ❌
❌
death of the business owner
(Identifying the Business Transactions and Events)
✅ or ❌
❌
salaries paid to a company driver
(Identifying the Business Transactions and Events)
✅ or ❌
✅
Gasoline withdrawn for company’s use
(Identifying the Business Transactions and Events)
✅ or ❌
✅
To pair of a house owned by the manager
(Identifying the Business Transactions and Events)
✅ or ❌
❌
similar to Capital, Proprietary interest and Net worth
a. Breakeven Sales
b. Profit
c. A=L+P
d. Business Entity
e. Owner’s Equity
f. Solvency
g. Balance Sheet
h. Books of Accounts
i. Matching Principle
j. Income Statement
e. Owner’s Equity
revenue exceeds expense
a. Breakeven Sales
b. Profit
c. A=L+P
d. Business Entity
e. Owner’s Equity
f. Solvency
g. Balance Sheet
h. Books of Accounts
i. Matching Principle
j. Income Statement
b. Profit
basic accounting equation
a. Breakeven Sales
b. Profit
c. A=L+P
d. Business Entity
e. Owner’s Equity
f. Solvency
g. Balance Sheet
h. Books of Accounts
i. Matching Principle
j. Income Statement
c. A=L+P
shows the results of operation at the end of the period
a. Breakeven Sales
b. Profit
c. A=L+P
d. Business Entity
e. Owner’s Equity
f. Solvency
g. Balance Sheet
h. Books of Accounts
i. Matching Principle
j. Income Statement
j. Income Statement
Total cost and expenses is equal to sales
a. Breakeven Sales
b. Profit
c. A=L+P
d. Business Entity
e. Owner’s Equity
f. Solvency
g. Balance Sheet
h. Books of Accounts
i. Matching Principle
j. Income Statement
a. Breakeven Sales
Combined concept of Revenue and Expense recognition
a. Breakeven Sales
b. Profit
c. A=L+P
d. Business Entity
e. Owner’s Equity
f. Solvency
g. Balance Sheet
h. Books of Accounts
i. Matching Principle
j. Income Statement
i. Matching Principle
business is separate from the owner
a. Breakeven Sales
b. Profit
c. A=L+P
d. Business Entity
e. Owner’s Equity
f. Solvency
g. Balance Sheet
h. Books of Accounts
i. Matching Principle
j. Income Statement
d. Business Entity
records kept by the business
a. Breakeven Sales
b. Profit
c. A=L+P
d. Business Entity
e. Owner’s Equity
f. Solvency
g. Balance Sheet
h. Books of Accounts
i. Matching Principle
j. Income Statement
h. Books of Accounts
shows the financial condition as of the given date
a. Breakeven Sales
b. Profit
c. A=L+P
d. Business Entity
e. Owner’s Equity
f. Solvency
g. Balance Sheet
h. Books of Accounts
i. Matching Principle
j. Income Statement
g. Balance Sheet
cash availability to meet maturing obligation
a. Breakeven Sales
b. Profit
c. A=L+P
d. Business Entity
e. Owner’s Equity
f. Solvency
g. Balance Sheet
h. Books of Accounts
i. Matching Principle
j. Income Statement
f. Solvency
The professions like engineering and medicine also need the knowledge of accounting in pursuit to the practice of their professions.
(True or False)
True
In accounting, a clear distinction between business transactions and personal affairs of the owner should be made so that financial report will not be distorted.
(True/False)
True
Preparation and presentation of the financial statements of the entity is the primary responsibility of an accountant.
(True/False)
True
It becomes compulsory to all business establishments to maintain and keep business records as required by law.
(True/False)
True
The primary motive of a person engaged in business is profit.
(True/False)
True
The preparation of financial statements is governed and guided by concepts or assumptions which are the very foundations of GAAP.
(True/False)
True
Owner’s Equity represents residual interest in the assets of the business after deducting all liabilities.
(True/False)
True
Accounting provides management with information which are of financial in character and identifies which data is relevant for decision-making.
(True/False)
True
Decision-makers of the business are relying on financial accounting data to be able to make decisions.
(True/False)
True
The excess of revenues over expenses is called operating loss.
(True/False)
False
When total costs and expenses will equal to total sales, the sale is at break-even.
(True/False)
True
Capital is increased by additional investments and profits while it is decreased by withdrawals and losses from operations.
(True/False)
True
Books of accounts are like “diaries”, these record all transactions and events that took place in the life of the business.
(True/False)
True
The separation of the owner and his business is only an accounting assumption which is not true in real situation.
(True/False)
True
______ the account title to describe money, either paper or in coins and money substitutes like checks, postal money orders, bank drafts, etc.
Cash
_____ are defined as short-term, highly liquid instruments that are readily convertible into cash and they present insignificant risk of changes in values because of changes in interest rates.
Cash Equivalents
_____ these are assets which are held for sale in the ordinary course of business n the process of production for such sale or in the form of materials or supplies to be consumed in the production process in the rendering of services.
Inventory
______ the account title for a financial obligation of an enterprise that constitutes an oral or verbal promise to pay.
Accounts Payable
_____ the account title generally used by professional for income earned from the practice of their professions.
Professional Income
_______ the amount paid for business permits, licenses and other government dues.
Taxes and Licenses
______ an account title for the expired portion of the insurance premium.
Insurance Expense
_____ these are expenses incurred by the enterprise but are not paid.
Accrued Expenses
________ includes calculators, typewriters, adding machines, computers, steel filing cabinets and the like.
Equipment
______ includes chairs, tables, counters, display cases and the like.
Furnitures and Fixtures
_______ the account title for expenses that are paid in advance but are not yet incurred or have not yet expired.
Prepaid Expenses
______ the account title for cash received in advance but services are to be rendered yet.
Unearned Referred Income
What are the six (6) Basic Financial Statements?
- Income Statement
- Statement of Changes in Equity
- Statement of Cash-flows
- Balance Sheet
- Notes to the Financial Statements
What are the three (3) components of a Balance Sheet?
- Asset
- Liabilities
- Equity
What are the two (2) components of an Income Statement?
- Income/ Revenue
- Expenses
What are the five (5) elements of Financial Statements?
- Assets
- Liabilities
- Equity
- Income
- Expenses
What are the three (3) Accounting Values?
- Asset
- Liabilities
- Equity
The primary motive of a person engaged in business-
Profit
Nowadays, business establishments are obliged by law to keep business records for:
Taxation purpose
What is considered as the “life-blood” of a nation?
Taxes
Are uniform sets of accounting rules, procedures, practices and standards that are followed in preparing financial statements -
generally accepted accounting principles
The new standard-setting body that replaces the Accounting Standards Council
Philippine Financial Reporting Standards Council
Pronouncements that are contained in the old Statement of Financial Accounting Standards (SFAS) are now called
Philippine Accounting Standards
The principle that draws controversy, but are used by accountants because of its reliability -
objectivity principle
These are called components of a Balance Sheet -
accounting values
Which of the following are synenymous to owner’s equity, capital and net worth?
a. capital structure
b. proprietary interest
c. partner’s equity
d. all of these
d. all of these
These are called components of an income statement -
Revenue and Expenses
A person who borrows money from a bank to start with a business and treats his borrowings as capital rather than liability is under what concept?
Business Entity Concept
Under business entity concept, when a person starts with a business for the first time, his borrowed capital will be treated as -
capital investment
The accounting method and procedures should be applied on a uniform basis from period to period to achieve comparability in the financial statements-
consistency principle
A principle that calls for the proper matching of revenue and expenses for fair reporting of financial statements -
Matching
What principle in accounting that requires financial statements should be free from any material misstatement?
Free from error
When a P200 waste basket with an estimated life of 1 year was charged to expense at the time of purchase, this is an application of -
Materiality
A financial statement which directly relates to the measurements of financial position of an enterprise as of a given date -
Balance Sheet
Are resources controlled by the enterprise as a result of past transactions and events and from which future economic benefits are expected to flow the
and enterprise -
Assets
Which of the following are considered elements of financial statements -
a. Revenue or Income
b. Assets
c. Liabilities and Capital
d. All of these
d. All of these
This represents the claim of the creditor’s over the assets of the enterprise -
Liabilities
The residual interest in the assets of the enterprise after deducting all the liabilities.
Owner’s Equity
A financial statements which directly relates to the measurement of performance of an enterprise at the end of a given period -
Income Statement
Refers to the amount of cash or value of property that the owner has invested in the business but later withdrawn-
a. drawing
b. withdrawal
c. personal
d. all of these
d. all of these
Includes income from activities and events that do not form part of the ordinary course of the business operation-
Gain
The excess of revenues over costs and expenses -
profit
The excess of costs and expenses over revenues-
Loss
It the financial flexibility of the enterprise to use the available cash for unexpected requirements and investment opportunities -
capacity for adaptation
It is the source of financing for assets of the enterprise. It indicates how much is borrowed capital and how much is equity capital
financial structure
It is the stability of the enterprise to meet currently maturing obligation -
Liquidity
What is the basic accounting equation?
A = L + OE
Which of the following financial statements plays an important role in the business because profitability is its paramount concern?
a. Statement of Changes in Owner’s Equity
b. Statement of Financial Condition
c. Income Statement or Statement of Comprehensive
d. Statement of Cash Flows
c. Income Statement or Statement of Comprehensive
The expanded accounting equation is -
A = L+ OE - D + R - E
The financial statement that summarized the changes in equity for a given period of time -
Statement of Changes in Owner’s Equity
What are the data needed in preparing the statement of changes in owner’s equity
a. additional investment
b. withdrawal
c. profit for the period
d. all of the above
d. all of the above
Profit will result during a time period when
revenue exceed expenses
Which underlying concept serves as the basis for preparing financial statements at regular interval?
Time period
37-Almost everyone will benefit from the basic understanding of accounting terms an concepts, as their knowledge will enable them to -
a. become professional accountant
b. act in an ethical manner
c. better understand economic activities
d. prepare their own income tax return
c. better understand economic activities
Which of the following assumptions distinguishes the personal transactions business owners from business transactions?
Business entity concept
It is usually determined through professional judgment and common sense by the accountant or auditor -
Materiality
Financial Statements prepared are worth comparing for with other companies d the same line of business by pointing out similarities and differences -
comparability
Which of the following assumptions that requires distinction between business transactions and personal affairs of the owner?
Accounting entity
Which of the following is not considered as account title?
Withdrawal
Which of the following account titles is differently classified from the others?
a. cash on hand
b. owner’s equity
c. accounts receivable
d. unused supplies
b. owner’s equity
Which of the following account titles that fits the description of income earned but not yet received?
Accrued income
Which of the following account titles that is differently classified from the others?
a. rent expense
b. supplies used
c. taxes and licenses
d. drawing account
d. drawing account
It is an “asset-offset” account of Accounts Receivable.
Estimated Uncollectible Account
The assets that are classified as “Property and Equipment” are subject to depreciation except-
Land
Are identification or brief description of item that fall to same kind, class or nature-
Account titles
The end products of accounting process consisted of-
a. Income Statement and Balance Sheet
b. Statements of Changes in Owner’s Equity
c. Statements of Cash Flow
d. All of these
d. All of these
The anticipated loss that the business may incur arising from an uncollected receivable account is termed as-
Uncollectible Accounts
This refers to the allocated portions of property and equipment that has expired-
depreciation expense
the “asset-offset” or “contra-asset” account that is shown as deduction from property and equipment is termed as-
accumulated depreciation
Amortization Expense is the appropriate term given to an expired cost of a/an
intangible asset
Which of the following is an intangible asset?
a. land
b. furniture and fixtures
c. copyright
d. building
c. copyright
Land is not subject to depreciation because-
a. it is expected to be used in an indefinite period of time
b. it can easily be eroded
c. it can be sold at any time
d. it is a god-given wealth
a. it is expected to be used in an indefinite period of time
The incidental expenses incurred such as taxes, custom’s duties, trial run, insurance, installations and other costs needed before the property and equipment are used in the operation of the business are called -
Incidental expenditures
