Introduction to accounting

Question 1

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

Answer 1

Accounting

Question 2

The accountant analyzes each business transaction
and identifies whether the transaction is an “accountable event” or
“non-accountable event.

Answer 2

Identifying

Question 3

are recorded in the books of accounts.

Answer 3

Accountable events

Question 4

are not recorded in the books of accounts.

Answer 4

Non-accountable events

Question 5

The accountant recognizes (i.e., records) the
“accountable events” he has identified

Answer 5

Recording

Question 6

What recording process is?

Answer 6

Journalizing

Question 7

After journalizing, the accountant then classifies the
effects of the event on the

Answer 7

Accounts

Question 8

After journalizing, the accountant then classifies the
effects of the event on the “accounts.” This process is called

Answer 8

Posting

Question 9

At the end of each accounting period, the
accountant summarizes the information processed in the
accounting system in order to produce meaningful reports.

Answer 9

Communicating

Question 10

Accounting information is communicated to interested users
through accounting reports, the most common form of which is
the

Answer 10

Financial statements

Question 11

Types of information provided by
accounting

Answer 11

Quantitative information
Qualitative information
Financial information

Question 12

Archaeologists have found clay tokens as old as

Answer 12

8500 B.C

Question 13

Archaeologists have found clay tokens as old as 8500 B.C. in

Answer 13

Mesopotamia

Question 14

The personal transactions of the
business owner(s) are not recorded.

Answer 14

Separate entity concept

Question 15

assets are
initially recorded at their acquisition cost.

Answer 15

Historical cost concept

Question 16

The business is
assumed to continue to exist for an indefinite period
of time.

Answer 16

Going concern assumption

Question 17

Some costs are initially recognized as
assets and charged as expenses only when the
related revenue is recognized.

Answer 17

Matching

Question 18

income is recorded in
the period when it is earned rather than when it is
collected, while expense is recorded in the period
when it is incurred rather than when it is paid.

Answer 18

Accrual basis of accounting

Question 19

The observance of some degree of
caution when exercising judgments under conditions
of uncertainty. Such that, if there is a choice
between a potentially unfavorable outcome and a
potentially favorable outcome, the unfavorable one
is chosen. This is necessary so that assets or income
are not overstated and liabilities or expenses are not
understated.
Chap

Answer 19

Prudence

Question 20

The life of the business is
divided into series of reporting periods.

Answer 20

Reporting Period

Question 21

Assets, liabilities,
equity, income and expenses are stated in
terms of a common unit of measure, which
is the peso in the Philippines. Moreover, the
purchasing power of the peso is regarded as
stable. Therefore, changes in the purchasing
power of the peso due to inflation are
ignored.

Answer 21

Stable monetary unit

Question 22

An item is considered
material if its omission or misstatement
could influence economic decisions.

Answer 22

Materiality concept

Question 23

is a matter of professional
judgment and is based on the size and
nature of an item being judged.

Answer 23

Cost-benefit

Question 24

Information
communicated to users reflect a balance
between detail and conciseness, keeping in
mind the cost-benefit principle.

Answer 24

Full disclosure principle

Question 25

Like transactions are
accounted for in like manner from period to
period.

Answer 25

Consistency concept

Question 26

Fundamental Qualitative Characteristics

Answer 26

i. Relevance (Predictive Value, Confirmatory Value,
Materiality)
ii. Faithful Representation (Completeness, Neutrality,
Free from error)

Question 27

Enhancing Qualitative Characteristics

Answer 27

i. Comparability
ii. Verifiability
iii. Timeliness
iv.Understandability

Question 28

make
information useful

Answer 28

fundamental qualitative characteristics

Question 29

enhance the
usefulness

Answer 29

enhancing qualitative characteristics

Question 30

the information can be used
in making predictions

Answer 30

Predictive value

Question 31

the information can be
used in confirming past predictions

Answer 31

Confirmatory value

Question 32

is an ‘entity-specific’ aspect of
relevance.

Answer 32

Materiality

Question 33

means the information provides a true,
correct and complete depiction of what it purports to represent.

Answer 33

Faithful representation

Question 34

all information necessary for users to
understand the phenomenon being depicted is provided.

Answer 34

Completeness

Question 35

information is selected or presented without
bias.

Answer 35

Neutrality

Question 36

there are no errors in the description and in
the process by which the information is selected and applied.

Answer 36

Free from error

Question 37

Enhancing Qualitative Characteristics

Answer 37

Comparability, Verifiability, Timeliness, Understandability

Question 38

the information helps users in
identifying similarities and diff

Answer 38

Comparability

Question 39

different users could reach consensus as
to what the information purports to represent.

Answer 39

Verifiability

Question 40

the information is available to users in
time to be able to influence their decisions.

Answer 40

Timeliness

Question 41

users are expected to have:
a. reasonable knowledge of business activities;
and
b. willingness to analyze the information diligently.

Answer 41

Understability