Definitions

Question 1

Definition of Accounting accdg to ASC

Answer 1

Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision.

Question 2

Definition of Accounting accdg to AICPA

Answer 2

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 results thereof.

Question 3

Definition of Accounting accdg to AAA

Answer 3

Accounting is the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information.

Question 4

Public Accounting Services

Answer 4

1. Auditing
2. Taxation Service
3. Management Advisory Servie

Question 5

Auditing

Answer 5

fairness of preparation

Question 6

Taxation

Answer 6

preparation of annual income tax returns and determination of consequences

Question 7

Management Advisory Service

Answer 7

phases of business conduct and operations

Question 8

Controller

Answer 8

highest accounting officer in a business entity

Question 9

Private Accounting

Answer 9

CPAs are employed in business entities in various capacity

Question 10

Types of Accounting

Answer 10

1. Public Accounting
2. Private Accounting
3. Government Accounting

Question 11

Government Accounting

Answer 11

encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property and interpreting the results thereof

Question 12

GAAP

Answer 12

rules, procedures, practice and standards followed in the preparation and presentation of financial statements

Question 13

Accounting Assumptions are also known as

Answer 13

Postulates

Question 14

Accounting Assumptions

Answer 14

basic notions or fundamental premises on which the accounting process is based

Question 15

3 types of Underlying Accounting Assumptions

Answer 15

1. Explicit
2. Implicit
3. Excluded

Question 16

Explicit Underlying Accounting Assumption

Answer 16

Going Concern

Question 17

Implicit Underlying Accounting Assumption

Answer 17

1. Accounting Entity
2. Time Period
3. Monetary Unit

Question 18

Excluded Underlying Accounting Assumption

Answer 18

Accrual

Question 19

Going Concern

Answer 19

the accounting entity is viewed as continuing in operation indefinitely

Question 20

Accounting Entity

Answer 20

The entity is separate from the owners, managers, and employees who constitute the entity.

Question 21

Time Period

Answer 21

the indefinite life of an entity is subdivided into time periods or accounting periods which are usually of equal length for the purpose of preparing financial reports on financial position, financial performance and cash flows

Question 22

Two types of Periods

Answer 22

1. Accounting period

2. Fiscal Period

Question 23

Types of Years

Answer 23

1. Calendar Year

2. Natural business year

Question 24

Calendar year

Answer 24

12-month period ending on Dec.31

Question 25

Natural business year

Answer 25

12-month period ending on any month when the business is at the lowest or experiencing slack season

Question 26

Conceptual Framework

Answer 26

A summary of the terms and concepts that underlie the preparation and presentation of financial statements

Question 27

Classification of Users of Financial Information

Answer 27

1. Primary users

2. Other Users

Question 28

Primary Users

Answer 28

1. Existing & potential investors

2. Lenders & other creditors

Question 29

Other Users

Answer 29

1. Employees
2. Customers
3. Government & their agencies
4. Public

Question 30

Financial Position

Answer 30

Information about the entity’s economic resources and the claims against the reporting entity

Question 31

Liquidity

Answer 31

availability of cash in the near future to cover currently maturing obligations

Question 32

Solvency

Answer 32

availability of cash over a long term to meet financial commitments when they fall due

Question 33

Financial Performance

Answer 33

level of income earned by the entity

Question 34

Entity Theory

Answer 34

geared toward proper income determination

ASSETS = LIABILITIES + CAPITAL

Question 35

Proprietary Theory

Answer 35

directed toward proper valuation of assets

ASSETS-LIABILITIES = CAPITAL

Question 36

Residual Equity Theory

Answer 36

directed toward proper valuation of assets and applicable where there are two classes of shareholders

ASSETS - LIABILITIES - PREF. SHAREHOLDER’S EQUITY = ORDINARY SHAREHOLDER’S EQUITY