BASIC ACCOUNTING MIDTERM

Question 1

Accounting history can be traced back to a book called;
By an Italian mathematician;

Answer 1

Summa de Arithmetica, Geometria,
Proportioni et Proportionalita

Luca Pacioli

1494

Question 2

Its function is to provide quantitative information primarily
financial in nature about economic entities that is intended to be useful in making economic
decisions, in making reasoned choices among alternative courses of action.

Answer 2

Accounting Is a service activity.

Question 3

It is a means of communicating information about a
business. Its responsibility is applying a thorough knowledge of the theory of accounting, that is,
generally accepted accounting principles

Answer 3

Accounting is the language of business.

Question 3

Branches of Accounting:

Answer 3

-Financial Accounting
-Managerial Accounting
-Cost Accounting
-Government Accounting
-Auditing
-Taxation

Question 4

in a significant manner and in
terms of money, transactions and events, which are in part or at least of a financial in character and
interpreting the result thereof.

Answer 4

Accounting is the art of recording,classifying, summarizing

Question 5

deals with recording and reporting the past activities and events and
is intended for external users like Bureau of Internal Revenue, Banks, Security and Exchange Commission, etc. These records provide information that is also used in other branches of accounting. Its preparation is annually as per business accounting period.

Answer 5

Financial Accounting

Question 5

customized management reports and focuses mainly on the
information which can be useful to internal users or management in performing its basic
function in making decisions.

Answer 5

Managerial Accounting

Question 6

deals with the recording books of manufacturing businesses and
determining the cost of goods manufactured and sold, pricing, profitability as well as valuation
of inventories

Answer 6

Cost Accounting

Question 7

deals with systematized recording the past activities or transactions of all government agencies. It also include preparation of budgetary and
accountability reports.

Answer 7

Government Accounting

Question 8

deals with the verification of the fairness of the accounting reports prepared and whether they are in accordance with the Philippine Financial Reporting Standard Council.

Answer 8

Auditing

Question 9

deals with the determination of the different taxes imposed upon a business by the local government. All businesses registered under the Bureau of Internal Revenue requires to use the new e-birforms which are downloadable under www.bir.gov.ph in the preparation of their respective returns.

Answer 9

Taxation

Question 10

Kind of Business

Answer 10

1. Service Business or Servicing
2. Merchandising or Trading Business
3. Manufacturing Business
4. Franchising

Question 11

this involves the rendering of services for a certain fee.
Example: Repair shop, laundry shop, educational institution, tutorial services, parlor, Spa,
etc.

Answer 11

Service Business or Servicing

Question 12

this involves buying and selling of goods without changing its original state which will be sold at a price higher than the purchase cost.

Answer 12

Merchandising or Trading Business –

Question 13

this involves the conversion of raw materials into finished goods by adding labor, materials and overhead which will be sold at a price higher than the cost of
production. Example: Diner, Restaurants, Furniture Shop, Handicrafts shop, chemical laboratories, Dressmaking, Tailoring, Car Manufacturer, etc.

Answer 13

Manufacturing Business

Question 13

special business agreements that requires the franchisee to pay certain
franchise fees to the franchiser for the privilege to operate the use of the latter’s business.
Example: Mc Donald’s, Jollibee, Dunkin Donuts, Master Siomai, etc.

Answer 13

Franchising

Question 14

Forms of Business:

Answer 14

1. Sole or Single Proprietorship
2. Partnership
3. Corporation
4. Cooperative

Question 15

a business owned and operated by only one person.

Answer 15

Sole or Single Proprietorship

Question 15

a business owned by two or more persons.

Answer 15

Partnership

Question 16

a business owned by five or more persons called shareholders whose capital
is divided into shares of stocks.

Answer 16

Corporation

Question 16

a business whose capital is owned by several financially challenges people
called members

Answer 16

Cooperative

Question 17

refers to the management those with direct interest in the firm which includes
owner in a single proprietorship, managing partner, Board of Directors (BOD) – for stock
corporations, Board of Trustees (BOT)– for non-stock corporations

Answer 17

Internal Users

Question 17

refers to those with financial claim or interest in the business. Such as a
Partner who is not a manager, prospective investors, suppliers, creditors, lending institutions,
customers, employees, government, and general public.

Answer 17

External Users

Question 18

Users of Accounting Information:

Answer 18

1. Internal Users
2. External Users

Question 19

Principles of Financial Accounting

Answer 19

1.Accounting Entity 2. Going Concern. 3. Monetary Unit – or Unit of Measurement 4. Time Period 5. Materiality 6. Accrual

Question 20

the firm is separate and distinct from that of the owner and other firm. Transactions of the firm are kept separate from that of the personal transaction owner or manager.

Answer 20

Accounting Entity –

Question 20

all quantitative unit be stated in Philippine pesos. It further assumes that the peso is stable and hence changes in the purchasing power of the peso are ignored.

Answer 20

Monetary Unit – or Unit of Measurement

Question 20

the firm is viewed as operating indefinitely, which is why assets are shown in the Balance Sheet at historical cost and not at current market prices.

Answer 20

Going Concern

Question 21

the indefinite life of a firm is divided into periods of equal length (12months) also known as accounting period

Answer 21

Time Period –

Question 21

financial reporting is only concern with information that is significant enough to effect evaluations and decisions. Sometimes known as the Doctrine of convenience, strict adherence to accounting theory is not required where the items are insignificant.

Answer 21

Materiality

Question 22

– requires that the revenues be recognized or recorded when earned regardless of when payment is received and expenses be recognized when incurred regardless of when paid. This is also referred to “revenue realization principles.” Revenue is considered earned when goods are delivered or services performed. Expenses are incurred when goods and services had been received or consumed.

Answer 22

Accrual

Question 22

Objectives of Financial Accounting

Answer 22

1. Relevance 2. Understandability 3. Verifiability 4. Neutrality 5. Timeliness 6. Comparability 7. Completeness

Question 22

– information that has no bearing for decision making is useless regardless of the extent to which it satisfies the other objectives.

Answer 22

Relevance

Question 23

– aims to present data in the form and terminology adapted to the user’s range of understanding.

Answer 23

Understandability

Question 24

– aims to generate financial statement data that can be substantially duplicated or corroborated by independent measures using the same measurement methods.

Answer 24

Verifiability

Question 25

– financial statements are prepared for the common users in mind instead of a particular needs and desire for specific users.

Answer 25

Neutrality

Question 26

– financial statements should be ready and available at a time when they are needed for decision-making or to guide future actions.

Answer 26

Timeliness

Question 27

– financial statements data of one firm can be compared to that of other firms within the industry.

Answer 27

Comparability

Question 28

– seeks to include all financial data necessary to pursue the requirements of the other qualitative objectives mentioned above.

Answer 28

Completeness

Question 29

Basic Accounting Elements:

Answer 29

ALORE Assets Liabilities Owner;s equity or catipal Revenues Expenses

Question 30

are properties or economic resource owned by the business

Answer 30

Assets –

Question 31

these are amounts owed by the business.

Answer 31

Liabilities

Question 32

– the inflows of assets resulting from sales of goods and services.

Answer 32

Revenues

Question 33

– represents owner’s interest or claim in the assets of the business after subtracting the interest of the creditors.

Answer 33

Owner’s Equity or Capital

Question 34

– are outflows of assets resulting from cash spent or liability incurred in order to generate the revenue. Expenses decreases the equity

Answer 34

Expenses

Question 35

it means the value received by the business or what the business paid for

Answer 35

Debit

Question 36

it means the value parted with or given up by the business or the source of value received by the business.

Answer 36

Credit

Question 37

To increase an asset, you ------ it; to decrease an asset, you ----- it

Answer 37

debit credit

Question 38

Basic Accounting Equation

Answer 38

ASSETS = LIABILITIES AND OWNER’S EQUITY

Question 39

– are grouping of similar items to reduce the number of items to be provided for in the recording process.

Answer 39

Accounts

Question 40

– are the formal accounting books where the business transactions are recorded. Example: Journal Book, Ledger, Cash Disbursements Book, Receipts Book, Subsidiary Sales, and Subsidiary Purchases.

Answer 40

Books of Accounts

Question 41

– this are cash withdrawn made by the owner or partners which is not considered as a reduction of capital but rather an advance distribution of profit.

Answer 41

Drawing or Withdrawal

Question 42

provides that all certified public accountants (CPAs) shall abide by the requirements, rules and regulations on continuing professional education to be promulgated by the Board of Accountancy (BOA), subject to approval of the Professional Regulation Commission (PRC).

Answer 42

Section 32 of Republic Act (RA) No.9298 (The Philippine Accountancy Act of 2004)

Question 43

provides that the total CPE credit units is 60 to be earned over a period of three years, provided that a minimum of credit units is earned each year. *

Answer 43

Rules and Regulations of RA No. 9298

Question 44

provides that CPAs, firms, and partnerships engaged in the practice of public accountancy shall have the necessary accreditation renewable for the period of three years

Answer 44

Section 31 of RA No. 9298

Question 45

the umbrella organization of all practicing certified public accountants in the Philippines

Answer 45

Philippine Institute of Certified Public Accountant (PICPA)

Question 46

is the arm of PICPA tasked with the job of promulgating guidelines for the standard practice of accounting.

Answer 46

Accounting Standards Council (ASC)

Question 47

-consist of one debit and one credit. -has more than one debit and a credit or one debit and more credits or both.

Answer 47

-Simple Journal Entry -Compound Journal Entry

Question 48

It is a routine and cyclical activity that applies to all business firms that intend to monitor or keep track of business operations.

Answer 48

ACCOUNTING CYCLE

Question 49

is where business transactions are first recorded in a Journal book based on the original documents ( Official receipts, invoices, cash and check vouchers)

Answer 49

Journalizing

Question 50

remember to leave a trail such that one is able trace the transfer made from the journal book to the ledger and vice versa.

Answer 50

Folio column

Question 51

is the process of adding up all the debit and credit column and extracting the balance.

Answer 51

Footing

Question 52

Is a list of all balances per account title in the general ledger, to check the accuracy of the posting by testing the equality of the debit and credit of all account title found in the ledger after footing

Answer 52

Preliminary Trial Balance

Question 53

. The Process of transferring journal entries to individual ledgers is known as _______

Answer 53

posting

Question 54

a multiple column sheets wherein all necessary information used for the preparation of the financial statement is recorded in a systematic process

Answer 54

Worksheet

Question 55

general worksheet contains 5 pairs of columns or 10 columns worksheet can serve the purpose of general business. These 5 fairs columns are:

Answer 55

1. TriaL Balance 2. Adjusting Entries 3. Adjusted Trial Balance 4. Income Statement 5. Balance Sheet