ACCCOB2 Quiz 1 (Chapters 1-3)

A complete set of financial statements is comprised by a statement of financial position, a statement of profit or loss, a statement of changes in equity, and a statement of cash flows.

False - the notes is part of the complete set of financial statements

Under the Voucher System, the firm establishes a petty cash fund to record and pay small expenditures.

False - under the IMPREST System, the firm establishes a petty cash fund to record and pay small expenditures

The Bureau of Internal Revenue is one of the users of financial statements and is correctly classified as a primary user.

False - the BIR is classified as OTHER USERS

Under Financial Accounting, general purpose financial statements are prepared to meet the needs of primary users only.

False - to meet the needs of primary AND OTHER USERS

The conceptual framework is a structured representation of the financial condition and performance of a business entity.

False - FINANCIAL STATEMENTS are a structured representation of the financial condition and performance of a business entity

The Philippine Financial Reporting Standard lays down the rules and procedures in the preparation and presentation of financial statements for financial statement users.

True

A piece of information is relevant if it can make a difference in the decision made by a user.

True

Understandability is one of the enhancing qualitative characteristics of a financial information.

True

The Cash account includes bills, coins, and checks received from customers awaiting deposit to the checking account.

True

A DAIF check is a customer's check previously received and deposited by the firm but subsequently returned for insufficiency of funds.

True

A check dated October 1, 2023 that is not negotiated with the bank as of December 31, 2023, end of the current period, should be excluded from the cash balance.

False - it is included since it is NOT YET a stale check

A deposit in transit is a reconciling item that is presented as addition to the balance per books.

False - presented as addition to the balance per BANK

An example of a debit memo is interest income that has been recorded by the bank but not yet recorded by the depositor.

False - an example of a CREDIT memo is interest income that has been recorded by the bank but not yet recorded by the depositor

Outstanding check is a reconciling item that is classified under timing difference.

True

Short-term investments are highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value.

False - CASH EQUIVALENTS are highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value

Compensating balance maybe withdrawn by the depositor if it is not legally restricted.

True

The bank reconciliation statement can be prepared by the accountant of the firm even without the bank statement.

False - the back reconciliation statement CANNOT be prepared by the accountant of the firm even without the bank statement

Undelivered check, if not corrected, will overstate the cash balance per ledger at the end of the current period.

False - undelivered check, if not corrected, will UNDERSTATE the cash balance per ledger at the end of the current period

A bank draft is always part of cash and cash equivalents.

True

A check issued by the depositor for P3,250 was erroneously recorded by the bookkeeper in the cash payments journal as P325. This error understated the cash balance per ledger by P2,925.

False - this error will OVERSTATE the cash balance

Paid but unreplenished petty cash vouchers are not part of cash.

True

Accounts receivable, short-term notes receivable, and long-term notes receivable are all presented in the statement of financial position under the group label, Trade and other receivables.

False - long-term notes receivable is NOT part of the label, trade and other receivables, because it is a NONCURRENT asset

Write off of customer accounts under the allowance method decreases accounts receivable and its contra-account.

True

Aging of accounts receivable is a method of providing estimated losses on customers' account whereby accounts that are past due for a shorter period will be assigned higher estimated loss rate.

False - will be assigned LOWER estimated loss rate

Recovery of accounts previously written off decreases total current assets but increases owner's equity.

False - recovery of accounts previously written off INCREASES total current assets AND owner's equity.

Upon initial recognition, a 5-year notes receivable is measured at present value.

True

When the effective rate of interest of a long-term notes receivable is higher than the nominal interest rate, the note is said to be issued at a discount.

True

Interest received on long-term notes receivable is computed by multiplying the face amount of the note by its nominal rate of interest.

True

When a long-term notes receivable is issued at a premium, the periodic amortization of the premium decreases as well as the carrying value of the note.

False - when a long-term notes receivable is issued at a premium, the periodic amortization of the premium INCREASES while the carrying value of the note DECREASES

When a note receivable is discounted with a bank with recourse, the bank can no longer collect from the firm if the maker of the note fails to pay the maturity value of the note at maturity date.

False - the bank CAN COLLECT from the firm which discounted the note