Introduction, Accounting System and the Double-Entry System Flashcards
True or False
Owners’ claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses.
True
True or False
Financial statements are the major means of communicating accounting information to interested parties.
True
True or False
Accounting communicates financial information about a business enterprise to both internal and external users.
True
True or False
Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process.
True
True or False
The economic entity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities.
True
True or False
Management consulting includes examining the financial statements of companies and expressing an opinion as to the fairness of their presentation.
True
True or False
The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets.
True
True or False
External transactions involve economic events between the company and some other enterprise or party.
True
True or False
Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company.
True
True or False
In order to possess future service potential, an asset must have physical substance.
True
Multiple Choice (Theory)
Which of the following is a qualitative characteristic of financial information in general purpose financial reports if it is to be useful?
a. All of these are qualitative characteristic
b. Understandability
c. Comparability
d. Reliability
a. All of these are qualitative characteristic
Multiple Choice (Theory)
According to the conceptual framework, which of the following is an enhancing quality that relates to both relevance and faithful representation?
a. Freedom from error
b. Confirmatory value
c. Comparability
d. Predictive value
c. Comparability
Multiple Choice (Theory)
Which of the following organizations is responsible for setting International Financial Reporting Standards?
a. Financial Accounting Committee
b. International Accounting Standards Board
c. Financial Accounting Standards Board
d. International Accounting Standards Committee
b. International Accounting Standards Board
Multiple Choice (Theory)
The double-entry accounting system means
a. Each item is recorded in a journal entry, then in a general ledger account.
b. The dual effect of each transaction is recorded with a debit and a credit.
c. Each transaction is recorded with two journal entries.
d. All of these are correct.
b. The dual effect of each transaction is recorded with a debit and a credit.
Multiple Choice (Theory)
The accounting equation must remain in balance
a. only when formal financial statements are prepared.
b. only at the time the trial balance is prepared.
c. only when journal entries are recorded.
d. throughout each step in the accounting cycle.
d. throughout each step in the accounting cycle.
Multiple Choice (Theory)
Which of the following is true about the double-entry system?
a. Each Transaction should be entered into two accounts in a ledger.
b. Each transaction involves two-person/parties.
c. The total debits should be equal to the total credits.
d. Each transaction involves a debit entry and a corresponding credit entry
d. Each transaction involves a debit entry and a corresponding credit entry
Multiple Choice (Theory)
Liabilities
a. are future economic benefits.
b. are things of value used by the business in its operation.
c. are existing debts and obligations.
d. possess service potential.
c. are existing debts and obligations.
Multiple Choice (Problem)
If total liabilities increased by P4,000, then
a. assets must have increased by P4,000, or owner’s equity must have decreased by P4,000.
b. assets and owner’s equity each increased by P2,000.
c. are things of value used by the business in its operation.
d. owner’s equity must have increased by P4,000.
a. assets must have increased by P4,000, or owner’s equity must have decreased by P4,000.
Multiple Choice (Problem)
If total liabilities increased by P14,000 during a period of time and owner’s equity decreased by P6,000 during the same period, then the amount and direction (increase or decrease) of the period’s change in total assets is a(n)
a. 8,000 increase.
b. 14,000 increase.
c. 20,000 increase.
d. 8,000 decrease.
a. 8,000 increase.
Multiple Choice (Problem)
If total liabilities decreased by P15,000 and owner’s equity increased by P5,000 during a period of time, then total assets must change by what amount and direction during that same period?
a. 15,000 decrease
b. 20,000 increase
c. 10,000 increase
d. 10,000 decrease
d. 10,000 decrease
Multiple Choice (Problem)
As of December 31, 2008, Wangshu Inn has assets of 35,000 and owner’s equity of 20,000. What are the liabilities for Wangshu Inn as of December 31, 2008?
a. 15,000
b. 25,000
c. 10,000
d. 20,000
a. 15,000
Multiple Choice (Problem)
The Yae Publishing House has five plants across Inazuma that cost P100 million. The current market value of the plants is P500 million. The plants will be recorded and reported as assets at
a. 600 million
b. 500 million
c. 100 million
d. 400 million
c. 100 million
