FAR QUIZ 1 Flashcards by Bianca Malicdem

What is the primary purpose of accounting?

To provide information that is intended to be useful in making economic decisions

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Which of the following statements regarding the recording of events is valid?

Only accountable events are recorded in the accounting books

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Accounting can be used as a tool in doing evil things, like embezzling of funds. All of the following can guide the accountant so that he/she will not misuse accounting, except

A. the strict adherence to generally accepted accounting standards and practices.

B.the adherence to a code of ethical conduct.

C.proper education and the inculcation of a sense of integrity on the accountant

D.the regular use of social media and the strict adherence to the values promoted by TV shows and Hollywood movies

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Statement I: Financial information is information expressed in terms of money. Statement II: Financial information is always qualitative information.

True; False

False: True

True, True

False, False

True; False

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The branch of accounting that deals with providing financial information to external decision makers is

A.Public accounting.

B. Government accounting

C. Financial accounting.

D. Managerial accounting.

C. Financial accounting

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Financial accounting applies to which of the following:

Businesses

Governments

All of the above

Non-profit organizations

All of the above

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External users of general-purpose financial statements include all of the
following except

Creditors

Investors

Owners who are directly involved in managing the business

Lenders

Owners who are directly involved in managing the business

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You want to put up a business - a pizza parlor. However, you have this *1/1 dilemma - you do not want to put up the business alone but you also do not want to enter into business deals with people you do not trust. At the most, you are only willing to accept one other individual to help you put up your pizza business. You have in mind your best friend who is more than willing to contribute resources in putting up the business. She is very excited about your business proposal and even changed her Facebook status to “self-employed.” She just texted you that she is willing to quit her day job in order to help you put up the pizza business. What type of business organization best suits your need?

Sole proprietorship

Partnership

Corporation

Cooperative

Partnership

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The following are decisions made by internal users except *

To impose taxes

To analyze the profitability of product lines

To decide whether to continue or discontinue product lines

To decide whether to build new production facilities

To impose taxes

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Mang Kulas Company sells “balut,” “penoy,” “taho,” and barbeque. At the 1/1 same time, Mang Kulas Company also offers spa, manicure, pedicure, and armpit hair removal to its customers. Mang Kulas Company is referred to as a

high breed business.

hybrid business

jack of all trades business.

hard-working business.

hybrid business

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Accounting concepts and principles can be derived from *

the Standards (ie., IFRS or PFRS)

the Conceptual Framework.

long-time use in the profession and have been proven to be most useful

All of these are sources of accounting concepts and principles used in practice.

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When uncertainty exists, the convention of conservatism or prudence uses estimates of a conservative nature in an attempt to ensure which of the following?

Assets, income, liabilities, and expenses are not overstated

Assets, income, liabilities, and expenses are not understated

Assets and income are not understated; liabilities and expenses are not overstated

Assets and income are not overstated; liabilities and expenses are not understated

Assets and income are not overstated, liabilities and expenses are not understated

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Which of the following does not form part of the accounting standards
used in the Philippines?

Philippine Financial Reporting Standards (PFRSS)

Philippine Accounting Standards (PASS)

Interpretations

Philippine Auditing Practice Statements

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Under this concept, the life of the business is divided into series of reporting periods. Thus, businesses normally prepare financial statements at least annually.

Time period

Conservatism constraint

Unit-of-measure assumption

Matching principle

Time period

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Under this concept, the cost of processing and communicating information 1/1 should not exceed the benefits to be derived from it.

Time period

Conservatism

Materiality

Cost-benefit

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While making a delivery, the driver of Fastrac Courier collided with another vehicle causing both property damage and personal injury. The party sued Fastrac for damages which could exceed Fastrac’s insurance coverage. Existence of the lawsuit was reported in the notes to Fastrac’s financial statements. What accounting principle, assumption or constraint is being applied in this situation?

Full-disclosure principle

Conservatism constraint

Matching principle

Unit-of-measure assumption

Full-disclosure principle

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The official accounting standard setting body in the Philippines is the

1/1

Accounting Standards Committee (ASC)

Financial Reporting Standards Council (FRSC)

Bureau of Internal Revenue (BIR)

Financial Accounting Standards Board (FASB).

Financial Reporting Standards Council (FRSC)

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Information has this qualitative characteristic if two different users could *1/1 reach a general agreement as to what the information intends to represent.

Relevance

Comparability

Faithful representation

Verifiability

Mr. Juan Batumbakal is an accountant in the Philippines while Mr. John Stonesteel is an accountant in a foreign country that uses the International Financial Reporting Standards. Which of the following statements is correct?

Mr. John’s accounting standards are superior to those of Mr. Juan’s.

Mr. John is more intelligent than Mr. Juan because Mr. John uses better accounting standards.

Mr. Juan is an inferior accountant compared to Mr. John because Mr. John is a

foreigner and Filipinos give higher regard to foreigners compared to their fellow

countrymen.

Mr. Juan and Mr. John use essentially the same accounting standards.

Under the accrual basis of accounting,

1/1

000 all real accounts have normal debit balances

income is recorded only when cash is received and expenses are recorded only when cash is paid.

liabilities, owner’s capital, and drawings all have normal credit balances

income is recorded in the period it is earned and expense is recorded in the

period it is incurred, irrespective of when cash is received or paid

income is recorded in the period it is earned and expense is recorded in the

period it is incurred, irrespective of when cash is received or paid

Mr. Van owns a butcher shop, a restaurant, and a catering business.

Separate financial statements are prepared for each business

independent of the other businesses. What accounting principle or

assumption is being applied in this situation?

1/1

Time period assumption

Separate entity assumption

Full-disclosure principle

Matching

Separate entity assumption

In accounting, an amount enclosed in parentheses means that the amount is

a monetary amount

not material.

a negative amount.

owned by the accountant

a negative amount.

The term ‘control’ as used in the definition of an asset means

you have the exclusive right to enjoy the economic benefits that an economic resource may produce.

you can prevent others from enjoying the benefits that an economic resource may

produce.

a and b

the inflows of economic benefits that an economic resource is expected to produce.

a and b

In which of the following cases would you have a present obligation?*

You have a strong desire to purchase a new electronic gadget next year.

0/1

You promised all your friends that you will treat them for a snack tomorrow and, as a consequence, you will have to honor your promise.

You told a supplier of your desire in (a) above, but you did not make any commitment hence you can always purchase from another supplier,

You purchased a can of sardines from the store, on credit. Upon opening the can. you found out that the sardines were spoiled. The store owner agreed not to collect the purchase price.

You promised all your friends that you will treat them for a snack tomorrow and, a consequence, you will have to honor your promise.

In which of the following cases would you have a present obligation? 0/1 You intend to enrol in a school but you don't have money for tuition fee. Your Mama gave you money for tuition fee but you have not yet enrolled. You enrolled in school and were assessed tuition fee. However, because you qualified for a 100% scholarship, your school cancelled your tuition fee, including miscellaneous fees. Your school even committed on giving you monthly allowance. You enrolled in school and paid in full your tuition fee

Your Mama gave you money for tuition fee but you have not yet enrolled

Which of the following would result to income of $320,000?* 0/1 Total expenses of $280,000 and loss of P40,000 Total expenses of $360,000 and profit of P40,000 Total expenses of P220,000 and loss of P100,000 Total expenses of P360,000 and loss of P40,000

Total expenses of $360,000 and loss of P40,000

It is a present obligation that has resulted from past events and has the "1/1 potential to cause a transfer of an economic resource in its settlement. asset. liability. expense. income

liability

At the start of the period, a business has total assets of $500,000 and total liabilities of P300,000. During the period, the business earned total income of $1,000,000 and incurred total expenses of P640,000. No additional investments or withdrawals were made by the owner. How much is the total equity at the end of the period? 480,000 520,000 560,000 640,000

560,000

The start-up capital of a business consisted of $1,000,000 cash provided *1/1 by the business owner and an additional #250,000 from a bank loan. The total start-up assets of the business therefore is $1,250,000 $1,000,000 P750,000 P250,000

$1,250,000

You are a business owner. Which of the following would you most likely consider as a favorable event? *1/1 Your total liabilities increased, while your total assets decreased. Your business earned income of P10M and incurred expenses of P40M Your total equity increased despite the fact that you did not make any contributions to the business during the period. Your business becomes a liquidating concern.

Your total equity increased despite the fact that you did not make any contributions to the business during the period.

Entity A had total assets, liabilities, and equity of P120M, P75M and P45M, respectively, at the beginning of the period. During the period. Entity A's total liabilities decreased by P20M, while its profit was P25M. There were no other transactions or events that affected equity during the period. How much is Entity A's ending total assets? P70M P85M P95M P125M

P125M

Entity A had total assets, liabilities, and equity of P140M, P90M and *0/2 P50M, respectively, at the beginning of the period. During the period, Entity A's total liabilities decreased to P40M, while its profit was P25M. There were no other transactions or events that affected equity during the period. How much is Entity A's ending total assets? P75M P95M P115M P125M

P115M

Entity A had total assets of P100M and total liabilities of P60M at the beginning of the period. If at the end of the period, total assets increased by P30M, while total liabilities remained the same, Entity A's total equity at the end of the period would be P70M P60M P90M 000 P80M

Entity A had total assets and total liabilities of P120M and P75M, respectively, at the beginning of the period. During the period, Entity A earned total income of P60 and incurred total expenses of P45. How much is Entity A's ending total equity? *0/2 P60M P80M P90M P120M

P60M

Entity A has ending total assets of P60M and ending total liabilities of P45M. Entity A had a beginning equity of P10M. If Entity A earned total income of P25M during the year, how much were the total expenses *2/2 PO 15M P20M P25M

P20M

Entity A has ending total assets of P160M and ending total liabilities of *0/2 P90M. Entity A had a beginning equity of P30M. If Entity A incurred total expenses of P50M during the year, how much was the total income? P70M P80M P90M P120M

P70M

At year-end, Entity A's total assets and total liabilities are P180M and P70M, respectively. If Entity A had a beginning equity of P75M and there were no contributions from, or distributions to, the owner during the period, how much profit (loss) did Entity A earn (incur) during the year? P35M (P35M) P25M (P25M)

P35M

In which of the following instances would it be acceptable for the accounting equation to not be balanced? 1/1 ✓ When there is a strong typhoon and classes are suspended. 000 When the accountant's calculator is "lowbat When the accountant is feeling sad and lonely. None. The accounting equation should be balanced at all times.

None. The accounting equation should be balanced at all times.

It is an economic resource controlled by the entity that has resulted from *1/1 past events and has a potential to produce economic benefits. Asset Equity Liability Income

Asset

If income exceeds expenses, 1/1 a loss is incurred. total equity is decreased. total equity is not affected. profit is earned.

profit is earned.

Which of the following account numberings would most likely connote an *1/1 expense account? 110 210 410 510

510

Which of the following statements is correct? * Freight-out is an expense account. Building is a liability account 0/1 Unearned income is an income account. In accounting parlance, depreciation means the decline in the value of an asset

Freight-out is an expense account