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Accounting 1 > Prelim > Flashcards

Prelim Flashcards

1
Q

This involves selecting economic events that are relevant to a particular business transactions

A

Identifying

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2
Q

In terms of monetary value

A

Measuring

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3
Q

Occurs through the preparation and distribution of financial and other accounting

A

Communicating

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4
Q

Is a service activity. It’s function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision.

A

Accounting

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5
Q

Is the 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 result thereof.

A

Accounting

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6
Q

Is the “LANGUAGE OF BUSINESS”.

A

Accounting

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7
Q

Flow of Economic Information in an Accounting System

A
  • From the source documents of daily transactions, data are identified and analyzed
  • The identified data are measured, recorded, classified and summarized into reports and financial statements
  • Reports/Financial Statements are communicated to users of financial information
    -Users if the financial information make judgement and decision/s
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8
Q

Return on Sales Formula

A

Return on Sales = Net Income
Sales

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9
Q

Users of Financial Statements

A
  • Primary Users
  • Other Users
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10
Q

Reports are directed to them primarily

A

Primary Users
- Owners
- Potential Investors
- Lenders

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11
Q

If a user of the information is an external party, and is not related to the business then he/she is considered as one of the external or users of accounting information

A

Other Users
- Vendors/Supplies
- Customers
- Government
- Employees
- Public

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12
Q

5 Components of Financial Statements

A
  1. Statement of Financial Position/Balance Sheet
  2. Statement of Comprehensive Income
  3. Statement of Changes in Equity
  4. Statement of Cash Flows
  5. Notes to Financial Statements
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13
Q

It is a financial statements that shows the financial condition of an entity as at the end of the period. It presents the assets, liabilities and owner’s equity

A

Statement of Financial Position/Balance Sheet

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14
Q

Is a financial statements that shows the financial performance of an entity for a particular accounting period. It presents the incomes, cost and expenses and the result of operations of entity for a period of time

A

Statement of Comprehensive Income

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15
Q

Is a financial statement that shows the items that change or affect the owner’s equity

A

Statement of Changes in Equity

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16
Q

Is a financial statements that provides information about cash inflows(cash receipts or cash collections and cash outflows(cash disbursements or cash payments) during an accounting period

A

Statement of Cash Flows

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17
Q

Comprising a summary of significant accounting policies and other explanatory information(disclosures)

A

Notes of Financial Statements

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18
Q
  • 14th to 17th Century
  • Lead to industrial evolution
  • fervent period of European cultural, artistic, political and “economic rebirth” following the Middle Ages
A

The Renaissance Period

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19
Q
  • Italian Mathematician
  • Friar
  • Father of Double Entry System (Bookkeeping)
  • DEBERE (IN)
  • CREDERE (OUT)
  • IN = OUT
  • DEBIT = CREDIT
A

Fra Luca Pacioli

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20
Q

When is income earned?

A

Income is earned when services are rendered or when the goods are delivered, not necessarily the period in which cash(collection) is recieved

21
Q

Qualitative Characteristics

A
  1. Fundamental Qualities
    - Relevance - Relevant information is capable of making difference in decisions made by users
    - Predictive value - Financial information has predictive value if it can be used as an input to processes employed by users to predict future outcomes
    - Confirmatory Value - Financial information has confirmatory value if it provides feedback about previous evaluations
    - Materiality - Information is material if omitting it or misstating it could influence decisions that users make on the basis of financial information about a specific reporting entity
  • Faithful Represenation - descriptions and figures must match what really existed or happened
  • Completeness
  • Neutrality
  • Free form error
22
Q

entity must be accounted for as an individual organization, separate and distinct(apart) from its owners, managers and employees who constitute the entity

A

Accounting Entity

23
Q

In the absence of evidence to the contrary, the accounting entity is viewed as continuing in operation indefintely

A

Going Concern (Continuity Assumption)

24
Q

Requires that the indefinite life if an entity is subdivide into accounting periods which are usually of equal length for the purpose of preparing financial statements

A

Time Period/Periodicity

25
Q

Assets, liabilities, equity, income and expenses should be stated I terms of a unit of measure

A

Monetary Unit

26
Q

Types of Business Activities

A
  • Service
  • Merchandising or Trading
  • Manufacturing
27
Q

An occupation or business that provides service for a fee. Examples are travel companies, airlines, hotels, schools, barber shops, and beauty salons

A

Service

28
Q

A business that buys products from another business to resell the products for products. Examples are department stores, supermarket, or grocery stores, hardware and drugstores

A

Merchandising or Trading

29
Q

A business that makes or manufactures products to sell. Examples are the furniture factories, drug laboratories, food processing companies, and garment factories

A

Manufacturing

30
Q

Types of Business Ownership Structures

A
  1. Sole Proprietorship
  2. Partnership
  3. Corporation
31
Q
  • Owned by one person
  • Small in size
  • Common in the service, retailing and farming industries
  • Usually manages the business and makes all the business decisions
A

Sole Proprietorship

32
Q

Is an organization where two or more persons bind themselves to contribute money, property or industry into a common fund with the intention of dividing the profits among themselves

A

Partnership

33
Q

An artificial being created by operation of law having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to it’s existence

A

Corporation

34
Q

Accounting Equation

A

ASSETS = LIABILITIES + OWNER’S EQUITY

35
Q

Elements of Financial Statements

A
  • Assets
  • Liabilities
  • Equity
  • Income
  • Expenses
36
Q

Present economic resources controlled by the entity as a result of past events and transactions and from which the future economic benefits are expected to flow to the entity

A

Assets

37
Q

Classification of Assets

A
  • Current Assets Accounts
  • Non-Current Assets Accounts
38
Q

Are presents obligation of the entity arising for the past events, the settlement of which is expected to result in an outflow for the entity of resources embodying economic benefits

A

Liabilities

39
Q

Classification of Liabilities

A
  • Current Liabilities Accounts
  • Non-Current Liabilities Accounts
40
Q

Is the residual interest in the assets of the entity after deducting all its liabilities

A

Equity

41
Q

Is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increase in equity, other than those relating to contributions from equity partcipants

A

Income

42
Q

Are decreases in economic benefits during the accounting period in the form of outflow or depletion of assets or incurrence of liabilities that result in decrease in equity, other than those relating to distributions to equity participants

A

Expenses

43
Q

Is an economic event that has direct impact on the business

A

Business Transaction

44
Q

Exchanges of assets and liabilities between the business and other parties

A

External Events

45
Q

Certain events that are not exchanges between the business and other parties but have direct and measurable effect on the elements

A

Internal Events

46
Q

Principles Underlying the Transaction Analysis Process

A
  1. Duality Of Effect
  2. The accounting equation must remain in balance after each transaction
47
Q

Every transaction has at least two effects on the basic accounting equation

A

Duality of Effects

48
Q

The accounting equation must remain in balance after each transaction. Total assets must equal to the total liabilities plus owner’s equity

A

Maintain the Accounting Equation Balance

49
Q

Steps in Performing Transaction Analysis

A
  1. What happen?
  2. What accounts are affected?
  3. How is accounting equation affected?
  4. Is the accounting equation in balance?

Accounting 1 (1 decks)

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