Chapter 1: Introduction to Accounting Flashcards by Tina A

True or False
Accounting is a process of identifying, recording and communicating economic information that is useful in making economic decisions

True

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True or False

Only accountable events are recorded in the books of accounts

True

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True or False

Accountable events are those that affect the assets, liabilities, equity, income, and expenses of a business

True

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True or False

Sociological and psychological matters are within the scope of accounting

False

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True or False

The basic purpose of accounting is to provide information that is useful in making economic decisions

True

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True or False

Contemporary accounting provides only quantitative information

False

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True or False
Accounting is described as a practical art. This is because it is a body of knowledge which has been systematically gathered, classified and organized

False

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True or False
Accounting is described as an information system. This is because it is it requires the use of creative skills and judgement

False

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True or False

Bookkeeping and accounting are the same

False

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True or False
In contrast with bookkeeping, accounting does not end with recording but rather extends to communicating the information processed, including the interpretation of the significance thereof.

True

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True or False
Accounting is often referred to as the “language of the soul” because it is fundamental to the communication of financial information

False

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True or False

Financial information in accounting reports is also quantitative information

True

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True or False
The basic objective of accounting is to provide information about a reporting entity that is useful in making rational economic decisions

True

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True or False

Qualitative information is information expressed in numbers

False

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True or False

All business transactions are recorded in the accounting records, without exception

True

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It is a process of identifying, recording and communicating economic information that is useful in making economic decisions

a. accounting
b. bookkeeping
c. auditing
d. marketing

a. accounting

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Which of the following phases in the accounting process comes first?

a. interpreting
b. recording
c. communicating
d. identifying

d. identifying

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A business transaction is recorded in the books of accounts if

a. it is an accountable event
b. it is favorable transaction
c. it increases assets
d. all of these

a. it is an accountable event

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Contemporary accounting provides which of the following types of accounting information?

a. quantitative information
b. qualitattive information
c. financial information
d. all of these

d. all of these

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The accounting report of Entity A includes an explanatory note explaining why expenses have increased during the period. This information is considered

a. quantitative information
b. qualitative information
c. financial information
d. all of these

b. qualitative information

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This refers to the accounting process of ascertaining whether a business transaction is to be recorded or not

a. measuring
b. communicating
c. identifying
d. reporting

c. identifying

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In this phase of the accounting process, accounting information is disseminated to interested parties

a. recording
b. communicating
c. identifying
d. disseminating

b. communicating

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Accounting is referred to as an information system. which of the following statements is incorrect?

a. the inputs to the accounting information system are the accountable business transactions and events
b. the process in the accounting information system involves recording, classifying and summarizing
c. the outputs of the accounting information system are the accounting reports
d. the output of the accounting information system is the accountant

d. the output of the accounting information system is the accountant

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Accounting is described in many ways. Which of the following is not one of those descriptions?

a. accounting is a practical art
b. accounting is an information system
c. accounting is the “language of business”
d. accounting is for accountants only

d. accounting is for accountants only

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Which of the following best describes the nature of accounting? a. it is a system responsible for generating the resources needed to fund the business operations b. it is the process of counting money c. it is something that only accountant can understand d. it is a process of providing information that is useful in making a wide variety of economic decisions

d. it is a process of providing information that is useful in making a wide variety of economic decisions

You are a business owner. It came to your attention that some of your products are overstocked while some are frequently out-of-stock. Warehousing costs have been increasing and you are losing potential sales. To come up with a right mix of products to store in your warehouse, what should you do? a. fire your sales personnel b. fire your warehouse custodian c. cry like a baby; face pressed on pillow d. obtain an accounting record of your sales per product line and identify which products are sold faster than the others. Stock more of those products and stock less of the products that take longer to sell.

d. obtain an accounting record of your sales per product line and identify which products are sold faster than the others. Stock more of those products and stock less of the products that take longer to sell.

Your friend offered you a business proposal. According to your friend, the initial investment is 10,000. You will get some products - 2 skin whitening soaps and 1 bottle of dishwashing liquid. If you get other investors to invest and those investors get other investors and those 'other' other investors get some more investors, you will receive a house and lot! (Wow) As a business learner, you should do any of the following except a. give your parent's hard-earned money to your friend. b. ask if your friend's business is properly registered with government regulatory agencies, e.g., Securities and Exchange Commission 'SEC'. Ask if you can examine the related registration documents c. obtain an objective understanding of your friend's business and its ability to give you a house and lot. Ask if your friend owns a house and lot. If he or she answers "No", there is a small chance that he or she could give you one d. say LOL. In your mind, you are thinking "I am an accounting student. You cannot fool me with your scam"

a. give your parent's hard-earned money to your friend.

He is considered the father of modern accounting a. Devin Pascoli b. John Petrucci c. Billy Sheehan d. Fra Luca Pacioli

d. Fra Luca Pacioli

True or False | Financial accounting is the branch of accounting that focuses on general-purpose financial statements

True

True or False General-purpose financial statements are those statements that cater to the common needs of a wide range of internal users.

False

True or False | Management accounting involves the accumulation and communication of information for use by external users.

False

True or False Accounting research includes a broad range of topics, which may be related to one or more of the other branches of accounting, the economy as a whole, or the market environment.

True

True or False | The rank and file employees of a reporting entity are considered internal users of the entity's financial statements.

False

True or False Cost accounting is the branch of accounting that deals with the examination of financial statements and the expression of an opinion thereof.

False

True or False | The government is exempt from preparing its own financial statements

False

True or False | Tax accounting involves preparation of tax returns and rendering of tax advice

True

True or False Users of financial statements who are not directly involved in managing the reporting entity are considered external users of the entity's financial statements

True

True or False | The decision on whether to invest or extend credit to an entity is most likely an internal user's decision

False

True or False Users of financial information are broadly classified based on the extent of their ability to affect the internal affairs of the reporting entity

True

True or False | Internal users are those who are directly involved in managing the entity.

True

True or False You own a business which you directly manage, day in, day out. You are internal user of the financial information of your business.

True

True or False You are a stockholder in a big corporation but you are not a member of the board of directors. You are an external user of the financial information of the corporation.

True

True or False | Providing managerial advice is within the purview of financial accounting

False

True or False The decision on whether to increase or decrease the sale price of a product is a decision commonly made by an external user of accounting information

False

True or False | Special purpose accounting information is information designed to meet the common needs of external users

False

True or False | The scope of financial accounting is general-purpose accounting information

True

True or False | Financial accounting provides information that is used in the other branches of accounting

True

True or False | The preparation of general purpose financial statements is addressed mainly by management accounting.

False

This refers to the accumulation and preparation of financial reports for internal users only a. management accounting b. financial management c. cost accounting d. tax accounting

a. management accounting

It is the branch of accounting that focuses on the preparation of general purpose financial statements a. management accounting b. financial accounting c. general accounting d. tax accounting

b. financial accounting

It is the branch of accounting that affects virtually all of the other branches of accounting a. management accounting b. financial accounting c. government accounting d. general accounting

b. financial accounting

Without this branch of accounting there will be no accountants a. tax accounting b. auditing c. accounting education d. daddy accounting

c. accounting education

These users are those who do not have direct access to the accounting records of the business and rely on general purpose financial records for most of their financial information needs a. external users b. internal users c. outside users d. accounting users

a. external users

These users are interested in information about the stability and profitability of the reporting entity in order for them to decide whether to sell or hold investments in stocks a. employees b. shareholders c. government agencies d. creditors

b. shareholders

These users need financial information about reporting entities for the purpose of regulating their activities a. employees b. shareholders c. government agencies d. creditors

c. government agencies

Which of the following is an internal user of financial information? a. board of directors b. shareholder c. lender d. creditor

a. board of directors

These users are interested in information about the profitability and stability of an entity in order for them to assess the entity's ability to provide remuneration, retirement benefits and employment opportunities a. customers b. public c. government agencies d. employees

d. employees

These users are interested in information that enables them to assess whether their loans, the relate interest thereon and other amount owing to them will be paid when due. a. lenders and creditors b. borrowers c. investors d. owners

a. lenders and creditors

You want to determine whether you can afford to obtain a new bank loan. In this regard, you need information on your average monthly sales and collection. What branch of accounting and related services could provide you with this information? a. management accounting - management report b. tax accounting - tax return c. auditing - audit opinion d. accounting research - internet article

a. management accounting - management report

You want to determine the amount of profit your business has earned during the month of April 20x1. What brach of accounting and related services could provide you with this information? a. cost accounting - cost analysis b. financial accounting - financial statements for the month of April 20x1 c. auditing - audit opinion d. accounting education - CPD units

b. financial accounting - financial statements for the month of April 20x1

You are required by the government to pay tax. What branch of accounting and related service could help you with this? a. management accounting - management report b. government accounting - financial statements of a government agencies c. accounting research - research on marketing methods using Facebook d. tax accounting - tax return

d. tax accounting - tax return

You are required by the government to maintain appropriate bookkeeping records for your business. What branch of accounting and related service could help you with this? a. management accounting - management report b. financial accounting - general record keeping c. auditing - audit opinion d. tax accounting - tax return

b. financial accounting - general record keeping

You determined that you can afford to obtain the loan. The bank requires you to submit audited financial statements of your business. What branch of accounting and related service could help you with this? a. financial accounting - financial statements b. auditing - audit opinion attached to the financial statements c. government accounting - accountability of government officers d. a and b

b. auditing - audit opinion attached to the financial statements

Your business sells ten products. You want to determine the cost of each of the products to help you price them more competitively. What branch of accounting and related service could help you with this? a. auditing - audit opinion b. tax accounting - tax return c. cost accounting - cost analysis d. accounting research - a research on why accountants are so boring and nerdy

c. cost accounting - cost analysis

You are planning on buying shares of stocks in the stock market. You have your eyes on ABC Corporation. Being an accounting student, you know that "hastes makes waste". Accordingly, you downloaded ABC Corporation's financial statements from the internet to help you analyze whether the current market price of ABC Corporation's shares of stocks are undervalued or overvalued. In this regard, what type of financial statement user are you? a. external user b. internal user c. Wi-Fi user d. Username and password

a. external user

True or False | Persons who are engaged in business are called entrepreneurs or businessman

True

True or False | The most common form of a business organization is corporation

False

True or False Mr. A and Mr. B entered into a contract to contribute their resources and put a business called A&B Co. The business of Mr. A and Mr. B is a corporation

False

True or False | The owner of a sole proprietorship business is called stockholder

False

True or False | A business is an economic entity that is organized primarily to make money

True

True or False Mrs. C is a taxi driver and a jeepney operator. Mrs. C. has three taxis and five jeepneys. The business registration of Mrs. C indicates her as the only owner. Mrs. C is a cooperative

False / True. Because there is now single corporation

True or False You and your batchmates decided to put up a fund. Whenever someone within your group needs money, he or she can borrow from the funds and pay interest. At the end of the year, you will subdivide among yourselves any interest earned by the fund. You registered your organization with the CDA. Your organization is cooperative.

True

True or False | Ownership in a corporation is represented by shares of stocks; the owners are called stockholders.

True

True or False Mr. A and Mr. B decided to acquire the business of Mrs. C. The newly found 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

True or False | The word "Inc." in ABC, Inc. is the abbreviation for incorporated, which connotes a corporate business.

True

True or False You and your four cousins put up a business and had it registered with the SEC. You own 60% of the share capitalization of the business while the remaining 40% is subdivided among your cousins Your business is most likely to have been organized as a cooperative rather than a corporation

False

True or False You and your four cousins put up a business and had it registered with the SEC. You own 60% of the share capitalization of the business while the remaining 40% is subdivided among your cousins Your business is a separate legal entity, meaning it can transact its own, can have its own properties, can incur its own obligations, and the like.

True

True or False You and your four cousins put up a business and had it registered with the SEC. You own 60% of the share capitalization of the business while the remaining 40% is subdivided among your cousins You and your cousins are considered agents of your business, If a customer gets sick from your product, that customer will directly sue each one of you, rather than the business.

False

True or False | Partnerships and corporations must be registered with the SEc.

True

True or False | You are a stockholder of NCPAR, Inc. If NCPAR distributes profit, your share in the profit is called dividend.

True

True or False | A partner in a partnership business can sell its own ownership interest in the business in the stock market.

False

True or False You and two other friends decided to put up a partnership business If one of you decides to call it quits, your business is automatically dissolved under the law. This is because a partnership has a limited life.

True

True or False You and two other friends decided to put up a partnership business Your business has a legal life of 50 years. Before the end of 50 years, you can renew it for another 50 years.

False

True or False You and two other friends decided to put up a partnership business If your business cannot pay its debts, the creditors can go after your personal assets to satisfy their claims. This is because a partnership has an "unlimited liability"

True

True or False You and your friend are members of a cooperative. You own 100,000 shares while owns 1 share. When casting votes during members meetings, you can only cast one vote, just like your friend and everybody else in the organization

True

True or False An advantage of a corporation over a partnership and a sole proprietorship is that in a corporation, the owner's liability for corporate debts is limited only to the amount they have contributed

True

True or False | The founders of a corporation are called incorporators

True

True or False | The incorporators of a corporation shall not be less than 5 but not more than 15 individuals

False -Any person, partnership, association or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes

True or False An advantage of a merchandising business over a service business is that the owner need not have the expertise or special skills.

True

True or False You own a business. Your business is engaged in buying goods at a wholesale price and reselling them at retail prices on Facebook. Your business is a manufacturing business

False

True or False Ms. D is a student, a senior high, just like you. If Ms. D starts a business today, right after class, it would most probably be a sole proprietorship and a merchandising business.

True

True or False | Mass production of goods is a characteristic of a service business

False

True or False | A medical clinic is merchandising business

False

True or Fale | Hotels and restaurants are more of a service-type business than merchandising

True

True or False | You are a CPA and have decided to put up an auditing firm. Your firm is considered a manufacturing business

False

Which of the following regarding partnership is incorrect? a. changes in the relationship of the partners may dissolve the partnership b. the contributions of the partners to the business are owned by the partnership c. a partnership has a separate legal entity d. a partnership is said to have an unlimited life because its legal life of 50 years can be renewed for an indefinite number of renewals.

d. a partnership is said to have an unlimited life because its legal life of 50 years can be renewed for an indefinite number of renewals.

A disadvantage of a partnership is a. unlimited liabilities of the partners b. unlimited life c. business risk is assumed by more than one owner d. better decisions - "two heads are better than one"

a. unlimited liabilities of the partners

The following are advantages of a cooperative except a. it is generally exempt from taxes b. limited liability c. management is prone to corruption and abuse d. members are on equal footing when it comes to voting on policies regarding the organization's relevant activities

c. management is prone to corruption and abuse

Which of the following is an advantage of a sole proprietorship? a. unlimited liability b. the sole owner assumes all the business risk c. difficulty is raising capital d. you are the only boss

d. you are the only boss

Which of the following id an advantage of a corporation? a. stricter regulations apply b. costly to establish c. to most people, corporate business has the impression of being a "big" business d. it is much easier for the owners to receive their share in the corporate profits

d. it is much easier for the owners to receive their share in the corporate profits

Personal reputation and credibility are most important in this type of business a. service b. mechandising c. manufacturing d. religion

a. service

Mr. D is a barber. He has many fans because he is the best in his field. His customers are always happy with his work. Mr. D is most probably involved in what type of business activity? a. story-telling b. service c. singing and dancing while cutting hair d. posting selfies on Facebook

b. service

This type of business inherently has the highest growth potential because it can mass-produce goods and can access a wider market a. service b. merchandising c. manufacturing d. religion

c. manufacturing

Cost of inventory, warehousing and logistics are least relevant to this type of business a. service d. merchandising c. manufacturing d. pyramid scam

a. service

A retailer of goods is most likely to be involved in what kind of business activity? a. service b. trading c. manufacturing d. beauty products

b. trading

You are a stockholder of ABC Company. ABC Company is most likely a a. cooperation b. sole proprietorship c. partnership d. corporation

d. corporation

You want to put up a business. You have adequate resources and skills to put up and run the business. You want to assume all the risk and keep all the rewards. What form of a business organization bets suits you a. sole proprietorship b. corporation c. partnership d. cooperative

a. sole proprietorship

You want to put up a business. You have adequate resources to initially finance a business but you lack the business opportunity and the technical skills needed in running the business. Your friend has the opportunity and the technical skills but lacks financial resources. If you and your friend agree to pool your resources and put up a business, the business is most probably a a. sole proprietorship b. corporation c. partnership d. cooperative

c. partnership

In this type of business organization, you are the only boss a. sole proprietorship b. corporation c. partnership d. cooperative

a. sole proprietorship

Your business, a sole proprietorship, is growing fast but faces a lot of regulatory restraints. Just last month, you failed to obtain a government accreditation because the requirement is that your business must be a corporation. You are worried that, if you change the form of your business organization into a corporation, someone might take over your business. You have adequate financial resources and, currently, you do not have any investment opportunity for any excess cash. Which of the following is a good option? a. change to a corporation and have your shares listed with the Philippine Stock Exchange (PSE) b. change to a corporation and retain a majority of the shares c. change to a cooperative d. retain the current form of your business organization

b. change to a corporation and retain a majority of the shares

To most people, this form of business organization has the impression of being small a. sole proprietorship b. corporation c. partnership d. cooperative

a. sole proprietorship

You are a visionary. You enjoy being innovative and hate being a copycat. What type of business would probably bring you satisfaction the most? a. a buy and sell business b. a manufacturing business c. an apartment owner leasing rooms to boarders and waiting for the 1st day of the month to collect rentals d. none of these, I would rather post selfies on my Facebook

b. a manufacturing business

You finished your studies, topped both the CPA and bar examinations and are now a CPA Lawyer. You want to put up an office so you can practice your profession and contribute to society. Your business would most probably s a. buy and sell business b. manufacturing business c. service business d. monkey business

c. service business

Many people want to have their own business but only a few have one. Which of the following is least likely the reason for this? a. it is often difficult to find the right timing where a business opportunity comes and you have financial and technical resources to take it (and vice-versa) b. most people are not willing to take the risk of quitting their job to start up a business c. most people who took the risk in putting up a business are zealous only at the start but fail to sustain continuing effort in growing their business d. most people prefer to mind the business of others than putting up their own business e. putting up a business is only for people who already have the capital

d. most people prefer to mind the business of others than putting up their own business

A business that produces goods in large quantities can save on fixed costs. This is called a. economy of motion b. economies of scale c. mass production d. Chinese style

c. mass production