Financial Accounting and Reporting 1 Flashcards
1
Q
A working paper that facilitates the preparation of financial statements.
A
Work sheet
2
Q
In a worksheet, when the debit total is more than credit total of the Income Statement, it signifies profit. (T or F)
A
False
3
Q
In a worksheet, when the credit total is more than debit total of the Income Statement, it signifies loss. (T or F)
A
False
4
Q
Journal entries made at the end of an accounting period to clear or eliminate the balances of temporary accounts.
A
Closing entries
5
Q
An account title used for summarizing the data for the revenue and expense accounts.
A
Income Summmary
6
Q
Journal entries made at the beginning of the accounting period to reverse the adjusting entries.
A
Reversing entries
7
Q
Only adjusting entries for deferred revenues when income method is used, and prepaid expenses when expense method is used, are reversed. (T or F)
A
True
8
Q
The worksheet is prepared to facilitate preparation of financial statements and recording of adjusting and closing entries. (T or F)
A
True
9
Q
All real accounts are extended to the Income Statement section of the worksheet. (T or F)
A
False
10
Q
All nominal accounts are extended to the Income Statement section of the worksheet. (T or F)
A
True
11
Q
The drawing account is the only temporary account that is found in the debit column in the Statement of Financial Position. (T or F)
A
True
12
Q
Nominal accounts are closed at the end of the accounting period. (T or F)
A
True
13
Q
Real accounts are closed at the end of the accounting period. (T or F)
A
False
14
Q
Expense accounts are closed by crediting the said accounts and debiting the Income Summary account. (T or F)
A
True
15
Q
Revenue accounts are closed by debiting the said accounts and crediting the Income Summary account. (T or F)
A
True
16
Q
After the preparation of closing entries, all accounts appearing in the Income Statement and Statement of Financial Position have zero balance. (T or F)
A
False
17
Q
Post-closing trial balance is prepared after the preparation of closing entries, and reflects nominal accounts to be forwarded to the next accounting period. (T or F)
A
False
18
Q
Adjusting entries on pre-collection using income method are reversed to the next accounting period. (T or F)
A
True
19
Q
Adjusting entries involving accrual of income are reversed, but not accrual of expenses. (T or F)
A
False
20
Q
A business organization that purchase and resell goods either in raw or finished form.
A
Merchandising or trading concern
21
Q
They purchase a large volume of merchandise directly from the manufacturers.
A
Wholesalers
22
Q
They sell products directly to customer.
A
Retailers
23
Q
Intangible in nature.
A
Service business
24
Q
Tangible in nature.
A
Merchandising business
25
Represents gross proceeds from cash sales and credit sales of merchandise less sales returns and allowances and sales discounts.
Net sales revenue
26
Original cost of purchase price of the merchandise that had been sold during a given period.
Cost of goods sold
27
The excess of the revenues from sales from cost of goods sold.
Gross profit
28
Expenses incurred by a merchandising business other than the cost of goods sold.
Operating expenses
29
Otherwise known as purchasing.
Buying
30
Tax on purchases which may be billed separately or not not billed separately on the invoice.
Input tax
31
Cost of transporting and storing the goods before it is sold.
Handling
32
Some of the goods purchased and received may have some defects or does not conform with the purchase order.
Returning of goods purchased
33
The document that specifies the amount of sales, the delivery and payment mode.
Sales invoice
34
A document issued by the carrier, trucking, etc. that specifies contractual conditions and terms of delivery.
Bill of lading, waybill, delivery receipt
35
Formal notice to the debtor detailing the amount already due.
Statement of account
36
The document issued by the seller to the buyer as evidence of cash received from the latter.
Official receipt
37
Bank printed forms with depositor's name, account number and spaces for details of the deposit.
Deposit slip
38
A written order to the bank by a depositor, to pay the specified amount as indicated.
Check
39
A form used by the seller to notify the buyer that his account is being reduced or credited.
Credit Memorandum
40
A form used by the buyer to notify the seller that his account is being debited or credited.
Debit Memorandum
41
A list of company's employees and the amount of money they are to be paid.
Payroll
42
A written request made by an employee or a user department to the purchaser of an entity that goods are purchased.
Purchase requisition
43
An authorization made by the buyer to the seller to deliver the goods or merchandise.
Purchase order
44
Major source of revenue of a merchandising business.
Sales
45
Cancellation of sale.
Sales return
46
Deductions from the original sales invoice price.
Sales allowance
47
Transportation expense incurred by the seller.
Freight Out
48
Temporary or nominal account used only for merchandise purchase for resale.
Purchases
49
It is credited when defective merchandise is returned to the supplier.
Purchase returns and allowances
50
Incentives of the company for buyers to pay early.
Discounts
51
The buyer pays the expenses of transporting the goods from the place of the seller.
Freight In
52
A period of time when goods are sold on credit/account.
Credit period
53
A percentage reduction in a list price that is not recorded in the books of accounts.
Trade discount
54
A reduction in price offered by terms of sale or purchase to encourage payment within a specified period.
Cash discount
55
The shipping term in which the seller assumes the transportation cost.
FOB Destination
56
Under this inventory system, both the sales amount and the cost of merchandise sold amount are recorded when an item of merchandise is sold.
Perpetual inventory system
57
The expenses are aggregated in the income statement according to their nature and are not reallocated among various functions within the enterprise.
Nature of expense method
58
An available discount taken by the buyer for early payment of an invoice.
Purchase discount
59
If the seller is to shoulder the cost of delivering the goods, the term is FOB Shipping
point. (T or F)
False
60
Post-closing trial balance is prepared after the journalizing and posting of closing
entries, and reflects real accounts to be forwarded to the next accounting period. (T or F)
True
61
If the shipping term is FOB shipping point and the buyer pays the expenses of transporting the good from the place of the seller to his place, the buyer debits the account "Freight In". (T or F)
True
62
The perpetual inventory system requires recording the cost of each sales as it
occurs. (T or F)
True
63
There is no physical count in the periodic inventory system since the accounts are continuously updated. (T or F)
False
64
Adjusting entries for unreplenished petty cash fund are reversed on the next accounting period. (T or F)
True
65
Under the perpetual inventory system, a physical count is required at the end of the accounting period in order to compute for the cost of goods sold. (T or F)
False
66
Freight-in is classified as selling expense. (T or F)
False
67
On June 1, 2020, Matt Company sold merchandise with a list price of P 500,000. Terms: 20,10, 2/10,n/30.
How much will be recorded as sales discounts if the amount due is collected within the discount period?
7,200
500,000X80%=400,000
400000 x 90%=360,000
360,000 x 2% = 7,200
68
WDE Inc. purchased an equipment costing P250,000 on July 1, 2020. The equipment had an estimated useful life of 10 years with an estimated salvage value of P50,000.
The balance of the Accumulated Depreciation account on December 31, 2020 is:
10,000
250,000-50,000= 200,000
200,000/120 x 6 = 10,000
69
The following accounts were closed to the Income Summary account:
Salaries Expense, P9,000 debit; Insurance Expense, P8,000 debit;
Utilities Expense, P7,000 debit; Service Revenue, P22,000 credit.
The amount and the entry to close Income Summary to the Capital account would be
Credit
Income Summary - 2,000
70
The company adopting the Imprest system has established P15,000 petty cash fund. The cashier has vouchers totaling P8,500.
How much petty cash fund should be presented in the financial statements if the cashier was able to replenish the said vouchers exactly at the end of the period?
15,000.00
71
On April 1, Mike purchased merchandise on account for P20,000, with the term FOB shipping destination, 1/10, n/30, and the seller prepays P2,000 in transportation costs.
When will be the last date that Mike should pay the accounts to be entitled for the discounts.
April 11
72
If an item with a list price of P15,000, subject to a trade discount of 20%, is paid within the discount period, term 2/10 n/30, the amount of payment would be?
11,760
15,000 + 3,000 (15,000x20%) = 12,000 + 240 (12,000 x 2%) = 11,760
73
A buyer receives an invoice for P10,000 dated June 10. If the term is 2/10. n/30, and the buyer pays the invoice within the discount period, what amount will the seller receive?
9,800
10,000 + 200 (10,000x2%) = 9,800
74
On Dec. 31, the trial balance of Shy Parlor included the following: purchases P123,500, purchase returns and allowances P7,500, freight-in P10,500, inventory beginning P26,500 and inventory end P28,750.
How much is the cost of good sold that must be reported in the income statement?
124,250
Beg. Inventory 26,500
Net purchase 126,500
GAS 153,000
Ending Inv. (28,750)
COGS 124,250
75
December 31, trial balance for Sim Inc. included the following: purchases, P600,000, purchases returns and allowances, P40,000, freight out, P6,000 , freight in P9,000 and ending inventory, P190,000.
The cost of goods sold is?
379,000
Net purchase 569,000
GAS 569,000
Ending Inv. (190,000)
COGS 379,000
76
A Trading Company purchased a delivery truck on April 1, 2022 amounting to P500,000. It is estimated to have a useful life of five years and a salvage value of P50,000.
What is the net book value of the delivery truck as of June 30, 2022 interim reporting using straight-line method?
477,500
500,000-50,000=450,000
450,000/60=7,500
7,500x3=22,500
500,000-22,500=477,500
77
It is calculated by adding net purchases to the beginning inventory to arrive at the cost of goods sold available for sale and then deducting from this sum the ending inventory.
Cost of goods sold
78
Another term for delivery expense.
Freight Out
79
Merchandise on hand (at cost price) at the end of the accounting period.
Merchandise inventory
80
An account debited for expenses incurred directly or indirectly in connection with the marketing of merchandise.
Selling expenses
81
The general principles of accounting applicable to a service type of a firm also applied to a merchandising firm. (T or F)
True
82
The difference between revenues from sales and cost of sales is operating income. (T or F)
False
83
A credit of "2/10, n/30" means that the buyer made it up 2% from the invoice if payment made within 10 days from the end of the month. (T or F)
False
84
If the seller is to shoulder the cost of delivering the goods, the terms are stated FOB shipping point. (T or F)
False
85
The perpetual inventory system requires recording of cost of each sales as it occurs. (T or F)
True
86
The account "sales" must be credited whether sales of merchandise was made on credit or on cash basis. (T or F)
True
87
The terms freight prepaid and freight collect will dictate who shoulders the transportation costs. (T or F)
False
88
Sales returns and allowances, and sales discounts are Contra revenue accounts and will have debit balance.
True
89
Maintenance of records.
Stock cards
90
If the seller is to shoulder the cost of delivering the goods, the terms are stated F.O.B. Destination. (T or F)
True
91
Freight out is added to the cost of merchandise purchased to compute for the cost of goods sold. (T or F)
False
92
If the buyer is to shoulder the cost of delivering the goods, the terms are F.O.B. Shipping point. (T or F)
True
93
Deductions made from the list price are called sales discount. (T or F)
False. Trade discount
94
Beginning merchandise inventory plus net purchases is equal to total cost of goods sold. (T or F)
False. GAFS
95
A discount given to induce prompt payment is called trade discount. (T or F)
False. Cash disount
96
Closing entries are prepared at the end of the accounting period to zero out all the accounts with balances. (T or F)
False. Nominal accounts
97
The physical count of merchandise at the end of the accounting period is needed to compute for the cost of goods sold if perpetual inventory system is used by the company. (T or F)
False
98
There should be a physical count of inventory under the perpetual inventory system in order to compute the cost of sales. (T or F)
False
99
Freight in is classified as selling expense. (T or F)
False. Net purchases, COGAS, COGS
100
Under the periodic inventory system, the entry to record the purchase of merchandise on account is debit Purchases and credit Accounts Payable. (T or F)
True
101
Office supplies purchased for office use should be debited to " Purchases". (T or F)
False. only for resale
102
Sales discounts and Sales returns and allowances are contra revenue accounts that should be added to Sales account. (T or F)
False. Deducted
103
The periodic inventory system requires recording the cost of each sales as it occurs. (T or F)
False. Perpetual
104
Failure to prepare an adjusting entry to record accrued income will result to have an overstated profit. (T or F)
False. Understated
105
The general principles of accounting applicable to a service type of a firm is not applicable to merchandising firm. (T or F)
False
106
Reversing entries are prepared at the beginning of the new accounting period to reverse certain types of adjusting entries made at the end of the preceding period. (T or F)
True
107
The difference between revenues from sales and cost of sales is gross profit. (T or F)
True
108
The terms freight prepaid and freight collect will dictate who pays the transportation costs. (T or F)
True
109
The account "Sales" should be credited for merchandise sold on cash basis only. (T or F)
False
110
Petty Cash Fund account is credited for every disbursement made out of petty cash fund. (T or F)
False
111
The unreplenished petty cash voucher should be adjusted at the end of the accounting period to avoid overstatement of income and assets. (T or F)
True
112
A special journal that contains columns for cash, purchases discounts, and accounts payable is a Cash Payment Journal. (T or F)
True
113
All types of business transactions cannot be recorded or journalized in one type of journal only. (T or F)
False
114
Purchases Returns and Allowances account is credited when the merchandise is returned to the creditor. (T or F)
True
115
This is used for summarizing the data for the revenue and expense account.
Income Summary
116
An expense that is already incurred but not yet paid.
Accrued expense
117
It is a deduction from the price of goods purchased to arrive at the selling price.
Trade discount
118
Major source of revenue of a merchandising business.
Sales
119
List of account titles classified or arranged according the to statement wherein they appear.
Chart of accounts
120
This is a temporary account used to accumulate the total cost of merchandise acquired during an accounting period.
Purchases
121
An expense that is already paid but not yet incurred
Deferred expense
122
Inflow of future economic benefits that increase equity, other than contribution or investment by owners.
Income
123
An income that is already earned but not yet received or collected.
Accrued revenue
124
Advance payment by the customer for products that are not yet delivered and earned by the business.
Deferred revenue
125
Shows the equality of the debit and credits.
Trial balance
126
A form used by the seller to notify the buyer that his account is being reduced.
Credit memorandum
127
An entry that splits the nominal and real accounts from mixed account.
Adjusting entry
128
A form used by the buyer to notify the seller that his account is debited or reduced.
Debit memorandum
129
One way of safeguarding cash.
Imprest system
130
Book of original entry used to record specific transactions only.
General journal
131
Book of original entry that records only one kind of transaction.
Special journal
132
A special journal designed to record sales on account.
Sales journal
133
A special journal where in all collections including cash sales are recorded.
Cash receipts journal
134
A special journal designed to record all types of cash disbursements.
Cash payments journal
135
A special journal where purchases on account are recorded.
Purchase journal
136
Accounting is defined by ______________________ as the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information.
American Accounting Association
137
Involves the recognition or non-recognition of business activities as accountable events.
Identifying
138
Involves the assigning of monetary amounts to the accountable economic transactions and events.
Measuring
139
Involves the preparation and distribution of accounting reports to potential users of accounting information.
Communicating
140
Accounting is defined by _________________ as an 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.
AICPA
141
Popularly known as journalizing
Recording
142
Sorting or grouping of similar items into their respective kinds.
Classifying
143
Involves the determination of the balances of each account in the ledger and the preparation of financial statements.
Summarizing
144
Involves giving meanings to the amounts, ratios, trends and other information derived from the financial statements.
Interpreting
145
Accounting is defined by the ________________ as a service activity.
Philippine Accounting Standards Council (ASC)
146
Father of Accounting
Luca Pacioli
147
These users of financial information are the parties to whom general purpose financial reports are primarily directed.
Primary users
148
They need the information to assess the ability of the entity to pay dividends.
Existing and potential investors
149
They need the information to determine whether their loans as well as the related interest can be collected by them when due.
Lenders and ote\her creditors.
150
These users are parties that may find the general purpose financial reports useful but the reports are not primarily directed to them.
Other users
151
They use information to assess the ability of the enterprise to provide remuneration, retirement benefits and employment opportunities.
Employees
152
They are interested about the continuance of the enterprise.
Customers
