Overview of Accounting

Question 1

What is Accounting?

Answer 1

It is the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information.

Question 2

What are the 3 important activities in Accounting?

Answer 2

Identifying, Measuring, Communication

Question 3

What is the process of analyzing events and transactions to determine whether or not they will be recognized?

Answer 3

Identifying

Question 4

What is the process of including the effects of an accountable event in the statement of financial position or the statement of comprehensive income through a journal entry?

Answer 4

Recognition

Question 5

What do you consider an accountable event?

Answer 5

It is one that affects the assets, liabilities, equity, income or expenses of an entity.

Question 6

What is the other name for an accountable event?

Answer 6

Economic activity

Question 7

What do you do to non-accountable events?

Answer 7

It is not recognized but is disclosed only in the notes, if they have accounting relevance.

Question 8

What is memorandum entry?

Answer 8

It is where a non-accountable event that has an accounting relevance is recorded.

Question 9

What are the 2 types of events or transaction?

Answer 9

External and Internal

Question 10

What do you call an event wherein there is a reciprocal giving and receiving of economic resources or discharging of economic obligations between an entity and an external party?

Answer 10

Exchange (reciprocal transfer)

Question 11

Give 3 examples of an Exchange event?

Answer 11

Any of these: sale, purchase, payment of liabilities, receipt of notes receivable in exchange for accounts receivable

Question 12

What do you call a ‘one-way’ transaction in that the party giving something does not receive anything in return while the party receiving does not give anything in exchange?

Answer 12

Non-reciprocal transfer

Question 13

Give 3 examples of Non-reciprocal transfer

Answer 13

Any of these: donations, gifts or charitable contributions, payment of taxes, imposition of fines, theft, provision of capital by owners, distribution to owners, etc.

Question 14

What do you call an event that involves changes in the economic resources or obligations of an entity caused by an external party or external source but does not involve transfers of resources obligations?

Answer 14

External event other than transfer

Question 15

Give 3 examples of External event other than transfer

Answer 15

Any of these: changes in fair value and price levels, obsolescence, technological changes, vandalism, etc.

Question 16

What type of event involves an entity and another external party?

Answer 16

External events

Question 17

What type of event do not involve an external party?

Answer 17

Internal events

Question 18

What do you call the process by which resources are transformed into finished goods?

Answer 18

Production

Question 19

Give an example of Production

Answer 19

Any of these: conversion of raw materials into finished products, production of farm products, etc.

Question 20

What do you call an unanticipated loss from disasters or other similar events?

Answer 20

Casualty

Question 21

Give an example of Casualty.

Answer 21

Any of these: loss from fire, flood, and other catastrophes

Question 22

What is the process that involves assigning numbers, normally in monetary terms, to the economic transactions and events?

Answer 22

Measuring

Question 23

What is the most commonly used measurement base?

Answer 23

Historical cost

Question 24

Financial statements are said to be prepared using a mixture of _____ and _____.

Answer 24

costs, values

Question 25

Costs include _____ and _____ while values include the _______________.

Answer 25

historical cost, current cost, other measurement bases