Financial Accounting and Reporting 1

Question 1

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

Answer 1

Accounting

Question 2

those who are directly involved in managing the business.

Answer 2

Internal Users

Question 3

Those who are not directly involved in managing the business.

Answer 3

External Users

Question 4

• Focuses on general purpose financial statements.
• General purpose caters the common needs of external users.
• It is governed by the Philippine Financial Reporting Standards (PFRSs)

Answer 4

Financial Accounting

Question 5

• Accumulation and communication of information for use by internal users.
• Management advisory services like services to client on matters of accounting, finance, business policies, etc.

Answer 5

Management Accounting

Question 6

• Accounting for the government.
• Focusing on public funds.

Answer 6

Government Accounting

Question 7

• Inspection of an entity’s financial statements.

Answer 7

Auditing

Question 8

• Preparation of tac returns and rendering of tax advice.

Answer 8

Tax Accounting

Question 9

• Systematic recording and analysis of the cost of materials, labor, overhead incident in the production.

Answer 9

Cost Accounting

Question 10

• Refers to teaching accounting and accounting related subjects.
• Process of facilitating the acquisition of knowledge and skills regarding one or more of the other branches of accounting.

Answer 10

Accounting Education

Question 11

• Careful analysis of economic events and other variables to understand their impact on decisions.
• It includes a broad range of topics, which may be related to one or more of the branches of accounting.

Answer 11

Accounting Research

Question 12

• Owned by one person
• Simplest form of business organization.
• this is registered with the Department of Trade and Industry (DTI)

Answer 12

Sole or Single Proprietorship

Question 13

• Owned by 2 or more individuals to carry on the business and divide among the earnings.
• It is registered with the Securities and Exchange Commission (SEC)

Answer 13

Partnership

Question 14

• owned by more than one individual.
• Unlike partnership, this is created by operation of law rather than contract.
• this is registered with the Securities and Exchange Commission (SEC).

Answer 14

Corporation

Question 15

• also owned by more than one individual.
• from the root word “cooperate” a cooperative who joined together to contribute capital.
• it is formed with the provisions of The Philippine Cooperative Code of 2008.
• They are called members.
• The are registered with the Cooperative Development Authority (CDA)

Answer 15

Cooperative

Question 16

Offers service as its main product

Answer 16

Service Business

Question 17

Is one that buys and sell goods

Answer 17

Merchandising Business

Question 18

Is one that buys raw materials and processes them into final products.

Answer 18

Manufacturing

Question 19

• Are a set of logical ideas and procedures that guide the accountant in recording and communicating economic information.
• It provides reasonable assurance that information communicated to users is prepared in a proper way.

Answer 19

Accounting concepts and principles

Question 20

Under this concept, the business is viewed as a separate person, distinct from its owner(s). Only the transactions of the business are recorded in the books of accounts.

Answer 20

Separate entity concept

Question 21

Under this concept, assets are initially recorded at their acquisition cost.

Answer 21

Historical cost concept

Question 22

Under this concept, the business is assumed to continue to exist for an indefinite period.

Answer 22

Going concern assumption

Question 23

Under this concept, some costs are initially recognized as assets and charged as expenses only when the related revenue is recognized.

Answer 23

Matching

Question 24

Under this concept, the income is recognized when earned, while expenses are recorded when it is incurred.

Answer 24

Accrual Basis of accounting

Question 25

Under this concept, the accountant observes some degree of caution when exercising judgements needed in making accounting estimates under conditions of uncertainty. Such that, accountant needs to choose favorable outcome over unfavorable one.

Answer 25

Prudence (or Conservatism)

Question 26

Under this concept, life is divided into series of reporting periods.

Answer 26

Time Period

Question 27

starts on January 1 and ends on December 31 of the same year.

Answer 27

Calendar year period

Question 28

covers 12 months but starts on a date other than January 1.

Answer 28

Fiscal year period

Question 29

Under this concept, assets, liabilities, equity, income, and expenses are stated in forms of a common unit of measure which is the Philippine Peso.

Answer 29

Stable monetary unit

Question 30

This concept guides the accountant when applying accounting principles. This is because accounting principles are applicable only to material items. An item is considered material if its omission or misstatement could influence economic decision.

Answer 30

Materiality concept

Question 31

Under this concept, the costs of processing and communicating information should not exceed the benefits to be derived from the information’s use.

Answer 31

Cost-benefit

Question 32

This concept is related to both concepts of materiality and cost-benefit. Under this concept, information communicated to users reflects a series of judgmental trade-offs.

Answer 32

Full disclosure principle

Question 33

This concept requires a business to apply accounting policies consistently, and present information consistently, from one period to another.

Answer 33

Consistency concept

Question 34

are Standards and Interpretations adopted by the Financial Reporting Standards Council (FRSC)

Answer 34

Philippine Financial Reporting Standards (PFRSs)

Question 35

The PFRSs are patterned from the?

Answer 35

International Financial Reporting Standards (IFRSs

Question 36

What is the Basic Accounting Equation?

Answer 36

a = l+c

Question 37

are the economic resources you control that have resulted from past events and can provide you with economic benefits.

Answer 37

Assets

Question 38

are your present obligation that have resulted from past events and can require you to give up economic resources when settling them.

Answer 38

Liabilities

Question 39

How do we get the Liabilities if it’s missing?

Answer 39

L = A-C

Question 40

How do we get the Capital if it’s missing?

Answer 40

C = L-A

Question 41

What is the Expanded Accounting Equation?

Answer 41

Assets = liabilities + capital + income – expenses

Question 42

basic storage of information in accounting.

Answer 42

Account

Question 43

specific item of asset, liability, equity, income or expenses.

Answer 43

Account title

Question 44

left side of the account, value received, come from the latin word “debere”

Answer 44

Debit side

Question 45

right side of the account, value parted with, come from the latin word “credere”

Answer 45

Credit side

Question 46

assets minus liabilities.

Answer 46

Equity

Question 47

increases in economic benefits during the period in the form of increases in assets, or decreases in liabilities, that results in increases in equity, excluding those relating to investments by the business owner

Answer 47

Income

Question 48

decreases in economic benefits during the period in the form of decreases in assets, or increases in liabilities, that result in decreases in equity, excluding those relating to distributions to the business owner.

Answer 48

Expenses

Question 49

includes money or its equivalent that is readily available for unrestricted use, e.g., cash on hand and cash in bank

Answer 49

Cash

Question 50

receivables supported by oral or informal promises to pay

Answer 50

Accounts receivable

Question 51

the aggregate amount of estimated losses from uncollectible accounts receivable. Another term is “allowance for doubtful accounts”

Answer 51

Allowance for bad debts

Question 52

receivables supported by written or formal promises to pay in the form of promissory notes.

Answer 52

Notes receivable

Question 53

represents the goods that are held for sale by a business. For a manufacturing business, inventory also includes goods undergoing the process of production and raw materials that will be consumed in the production process.

Answer 53

Inventory

Question 54

represents the cost of unused office and other supplies.

Answer 54

Prepaid supplies

Question 55

rent paid in advance.

Answer 55

Prepaid rent

Question 56

lot on which the building of the business has been constructed or a vacant lot which is to be used as future plant site. Land is not depreciable.

Answer 56

Land

Question 57

the structure owned by a business for use in its operations.

Answer 57

Building

Question 58

the total amount of depreciation expenses recognized since the building was acquired and made available for use

Answer 58

Accumulated depreciation – building

Question 59

machinery, transportation equipment, office equipment, computer equipment, furniture and fixtures.

Answer 59

Equipment

Question 60

the total amount of depreciation expenses recognized since the equipment was acquired and made available for use.

Answer 60

Accumulated depreciation – equipment

Question 61

obligations supported by oral or informal promises to be paid by the debtor.

Answer 61

Accounts payable

Question 62

obligations supported by written or formal promises to be paid by the debtor in the form of promissory notes.

Answer 62

Notes payable

Question 63

interest incurred but not yet paid. Interest payable arises from interest-bearing liabilities. For example, you will incur interest on your bank loan

Answer 63

Interest payable

Question 64

salaries already earned by employees but not yet paid by the business.

Answer 64

Salaries payable

Question 65

utilities like electricity, water, telephone, internet, cable, etc. already used but not yet paid.

Answer 65

Utilities payable

Question 66

items related to income that were collected in advance before they are earned. After the earning process is completed, these items are transferred to income.

Answer 66

Unearned income

Question 67

residual amount after deducting liabilities from assets

Answer 67

Owner’s capital (owner’s equity)

Question 68

this account is used to record the temporary withdrawals of the owner during the period.

Answer 68

Owner’s drawings

Question 69

revenues earned from rendering services.

Answer 69

Service fees

Question 70

revenues earned from the sale of goods

Answer 70

Sales

Question 71

revenues earned from the issuance of interest-bearing receivables.

Answer 71

Interest income

Question 72

earned from the sale of assets (except inventory) or from enhancement of assets or decrease in liabilities that are not classified as revenue.

Answer 72

Gains

Question 73

the value of inventories that have been sold during the accounting period.

Answer 73

Cost of sales (cost of goods sold)

Question 74

seller’s cost of delivering goods to customers.

Answer 74

Freight out

Question 75

salaries earned by employees for the services they have rendered.

Answer 75

Salaries expense

Question 76

the rentals that have been used up

Answer 76

Rent expense

Question 77

cost of utilities that have been used

Answer 77

Utilities expense

Question 79

the cost of supplies that have been used.

Answer 79

Supplies expense

Question 80

amount of estimated losses from uncollectible accounts receivable.

Answer 80

Bad debt expense

Question 81

portion of the cost of depreciable asset that has been allocated to the current accounting period.

Answer 81

Depreciation expense

Question 82

cost of promotional or marketing activities.

Answer 82

Advertising expense

Question 83

cost of insurance pertaining to the current accounting period.

Answer 83

Insurance expense

Question 84

cost of business and local taxes required by the government for conduct of the business.

Answer 84

Taxes and licenses

Question 85

transportation expenses represent the necessary and ordinary cost of employees getting from one workplace to another, while travel expenses represent the cost incurred when travelling on business trips.

Answer 85

Transportation and travel expense

Question 86

cost of borrowing money

Answer 86

Interest expenses

Question 87

various small expenditures which do not warrant separate presentation.

Answer 87

Miscellaneous expense