quiz 1

What is the definition of accounting?

Accounting 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 results thereof.

What is the historical definition of accounting?

In the past, accounting was defined as 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 results thereof.

What is the definition of AICPA for accounting?

When accounting was introduced in the Philippines, the American Institute of Certified Public Accountants (AICPA) described it as 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 results thereof.

What are the different components of accounting?

Accounting involves 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 results thereof.

What is the significance of accounting equation?

The accounting equation is significant because it represents the relationship between a company's assets, liabilities, and equity. It is used to ensure that the financial statements are accurate and balanced.

What is the purpose of accounting?

The purpose of accounting is to provide financial information about a business to its stakeholders, including investors, creditors, and management. This information is used to make informed decisions about the business.

What did the American Institute of Certified Public Accountants (AICPA) describe accounting as when it was introduced in the Philippines?

The AICPA described accounting as an "art" because it involves creative judgement in performing the accounting functions.

What are the different ways or methods that can be used in accounting?

There are different ways or methods that can be used in accounting, but all of which will arrive at the same result.

Is accounting an exact science?

No, accounting is not an exact science since the rules and processes are constantly changing due to innovations in economic operations.

What are the processes involved in the performance of the accounting functions?

The processes involved in the performance of the accounting functions are recording, classifying, and summarizing transactions, which is popularly known as bookkeeping, while interpreting the effects thereof through the preparation of reports is considered as financial accounting.

What is accounting often called?

Accounting is often called the "language of business" because it is the means by which business information is communicated to the stakeholders.

Does accounting have its own set of terminology?

Yes, accounting has its own set of terminology, like any language.

What is accounting?

Accounting is the process of providing data about an economic entity or business, measured in terms of money, using double-entry bookkeeping.

Who is considered the father of accounting?

Luca Pacioli, an Italian mathematician, is regarded as the father of accounting, particularly for businesses to keep track of their operations.

Why do we need accounting information?

Gathering and processing information about our business are important steps in decision making to arrive at more deliberate and rational judgments.

How do IT professionals define accounting?

IT professionals define accounting as an information system that provides reports about the economic activities and condition of a business to interested parties.

What does accounting provide in IT terms?

Accounting provides a syntax or arrangement that allows collection, storage, processing, retrieval, and communication of financial information.

What is the purpose of accounting in IT terms?

Accounting provides a syntax or arrangement that allows collection, storage, processing, retrieval, and interpretation of business information needed by interested parties.

What is the definition of accounting according to 365 Careers?

Accounting is an INFORMATION SCIENCE that is used to collect and organize financial data for organizations and individuals.

Is accounting a science or an art?

Accounting is both a science and an art. It applies objectivity, verifiability, and reliability, but also requires practice, practical knowledge, creativity, and personal skills.

What is the primary use of accounting?

Accounting was primarily developed for business use and provides information about ECONOMIC ENTITIES.

Why is it important to have basic knowledge about the business when performing accounting services?

It is important to have basic knowledge about the business when performing accounting services because accounting provides information about business entities.

What is an economic entity?

Economic or BUSINESS ENTITY is an organization intended to carry out commercial activity by using economic resources to provide goods or services to satisfy the needs of its customers.

What are the forms of business organization?

There are four (4) basic forms of business organization which defines the ownership structure of the business as follows: a) Sole Proprietorship b) Partnership c) Corporation d) Cooperatives.

What are the types of business operations?

Business operations vary depending on how business process is being conducted. There are three (3) major types of business operations as follows: a) SERVICE.

What is a commercial activity?

A commercial activity involves an undertaking relating to business intended to make money in the form of profits or gains.

What are the three major types of business operations?

The three major types of business operations are service, merchandising, and manufacturing.

What is the importance of accounting in business operations?

Accounting services involve processing of information gathered during its operations in terms of quantitative or measurable data primarily financial in nature or in terms of money. These data or information are intended to be useful to the business stakeholders.

Who are the stakeholders in a business?

The stakeholders in a business are those individuals or group of individuals who are interested in the business and who are considered the users of accounting information. Examples of business stakeholders are owners, managers, creditors, customers, and the government.

What are the different needs of stakeholders in a business?

The different needs of stakeholders in a business are: 1) owners/investors - risks of capital, 2) management - to carry out its planning, decision making, and control, 3) employees - ensure their salaries, 4) lenders/creditors/suppliers - possibility of receiving payments for loan principal and interest, and 5) customers.

What is the difference between service, merchandising, and manufacturing business operations?

Service business operations involve providing intangible services to customers, merchandising business operations involve buying and selling tangible goods, and manufacturing business operations involve producing tangible goods through a series of processes.

What are the three categories of accounting concepts?

Assumptions, restrictions, and principles.

What is the business entity assumption in accounting?

It separates the business from its owners and requires identifying and segregating business transactions from personal transactions.

Why is maintaining separate records for the business important under the business entity assumption?

It allows the owner to have a clear perception of the performance of their business and ensures that no personal losses are carried in the books of the business for the protection of its stakeholders.

What is the purpose of the restrictions category of accounting concepts?

To limit the range of acceptable accounting practices and ensure consistency in financial reporting.

What is the limitation category of accounting concepts?

It acknowledges the inherent limitations of financial reporting and the possibility of errors or omissions in financial statements.

What is the role of the government in accounting?

To ensure compliance with regulations related to financial reporting.

What is the concept of "no personal losses shall be carried in the books of the business"?

It is for the protection of its stakeholders, thereby maintaining the trust and confidence of the business industry.

What is the concept of "going concern"?

It assumes the business will continue to operate indefinitely, guaranteeing the business continuity with regards to its future commitments.

What is the concept of "accounting period"?

It supplements "going concern" where the firm's indefinite life is divided into periods, normally one year or 12 months, to know the results of operations and assess the firm's performance.

What is the concept of "measurement in money"?

Accounting provides quantitative information that is financial in nature, and only business activities that can be expressed or measured in monetary terms shall be recorded in the accounting books.

How does the concept of "accounting period" enable comparison of the firm's performance from period to period?

By dividing the firm's indefinite life into periods, it allows for the closing of books of accounts to assess the firm's performance and compare it from period to period.

What is the concept of materiality in accounting?

Materiality dictates that all significant facts must be part of the accounting process and only insignificant data may be left out.

What is the concept of conservatism/prudence in accounting?

Conservatism/prudence applies the worst-case scenario of a firm's financial future. Possibility of losses shall be included in the financial records, but gains should not be recorded until it is realized.

What is the concept of objectivity in accounting?

Objectivity requires that all financial transactions must be supported by objective evidence, such as receipts, invoices, and bank statements.

What cannot be recorded in the accounting books according to the given text?

Non-quantifiable items such as quality of service and employee skill level or expertise cannot be recorded in the accounting books.

What is necessary in determining the amount of impact a transaction will have on the business according to the given text?

Exercise of judgement is necessary in determining the amount of impact a transaction will have on the business.

What is the purpose of the concept of materiality in accounting according to the given text?

The purpose of the concept of materiality in accounting is to ensure that no vital information is excluded from the financial reports for the stakeholders to arrive at a rational decision.

What is the purpose of the concept of conservatism/prudence in accounting according to the given text?

The purpose of the concept of conservatism/prudence in accounting is to apply the worst-case scenario of a firm's financial future and record probable liabilities or obligations of the firm upon discovery.

What is the purpose of the concept of objectivity in accounting according to the given text?

The purpose of the concept of objectivity in accounting is to ensure that the financial records are accurate and reliable by requiring that all financial transactions must be supported by objective evidence.

What is the concept of objectivity in accounting?

Objectivity in accounting states that recorded transactions should be free from bias of the person recording it. Each transaction should be verifiable by supporting documents.

What is the purpose of the concept of consistency in accounting?

The purpose of the concept of consistency in accounting is to ensure that once a firm chooses to use a specific accounting method, it should continue using it so that multiple period reports can be reliably compared.

What is the dual aspect concept in accounting?

The dual aspect concept in accounting states that every transaction to be recorded would have a two-fold effect. This principle supports the double-entry system of accounting.

What is the double-entry system of accounting?

It means that each accounting transaction would affect at least two items in the business operations.

What is the historical cost principle?

This concept requires a business to initially record an asset, liability, or equity at its original acquisition cost or the cost at acquisition date.

What is the faithful representation concept?

Under this concept, financial reports should reflect a clear picture of the results of operation and condition of the business. All the information that the user needs is included and presents a fair view of the organization.

What is the full disclosure concept?

This concept requires the firm to support the financial reports with the relevant and necessary information to understand the data included on the financial reports. Full disclosure does not mean the release of all information but rather disclosure of information which would have a material impact on the firm's result of operation and financial condition.

What is the revenue recognition principle?

This concept entails revenue to be recognized in the financial reports at the period when it is earned, regardless of when the payment is received.

What is the Revenue Recognition Principle?

The Revenue Recognition Principle entails revenue to be recognized in the financial reports at the period when they are realized and earned regardless of collection.

What is meant by Realized Revenue?

Realized revenue means services have been performed or goods have been delivered.

What is the Expense Recognition/Matching Concept?

Expenses related to revenue should be recognized in the same period in which the revenue was reported.

When should expenses be recognized if they are difficult to correlate with revenue?

Said expenses would be recognized when they are incurred regardless of payment.

What is the Accounting Equation?

The Accounting Equation is the mathematical representation that shows the relationship of the three basic elements of accounting namely: assets, liabilities, and owners' equity.

What are Assets?

Assets are the firm's resources. These are properties that the business owns and practically control.

What are Claimants in the Accounting Equation?

The claimants could either be the creditors or the business owners.

What are assets in accounting?

Assets are the resources that a business owns and controls.

What are liabilities in accounting?

Liabilities are the obligations that a business owes and represent the claims of creditors against the firm's assets.

What is owners' equity in accounting?

Owners' equity is the amount that is left after deducting the firm's liability from its asset. This amount represents the owner's claim over the business.

What is the accounting equation?

The accounting equation is Assets = Liabilities + Owners' Equity.

How can you determine the amount of liabilities in the accounting equation?

By performing an inverse operation on the equation and still maintaining its algebraic equality, you can determine the amount of liabilities as follows: LIABILITIES = ASSET - OWNERS EQUITY.

How can you determine the amount of owners' equity in the accounting equation?

By performing an inverse operation on the equation and still maintaining its algebraic equality, you can determine the amount of owners' equity as follows: OWNERS EQUITY = ASSET - LIABILITIES.

What is the formula for determining owner's equity?

Owner's equity = Assets - Liabilities.

What is the scenario presented in the text?

Mr. A opened Akinto Barber Shop and invested P75,000 cash. He then purchased equipment from Ms. B amounting to P25,000 on credit.

What is the formula for computing total assets?

Asset = Liabilities + Owner's Equity.

What is the formula for computing liabilities?

Liabilities = Asset - Owner's Equity.

What are some examples of assets?

Cash, accounts receivables, notes receivables, inventory, property, plant, and equipment.

What are some examples of liabilities?

Accounts payable, notes payable, salaries payable, taxes payable, and loans payable.

What is the definition of inventory?

Goods or products that a company plans to sell to customers.

What is the definition of property, plant, and equipment?

Long-term assets that a company uses in its operations, such as land, buildings, and machinery.

What is the definition of accounts receivables?

Open credit of customers normally for a short-term period.

What is the definition of notes receivables?

Written promises to pay a certain amount of money on a specific date.

What is the definition of cash?

Cash on hand or cash in bank.

What is the definition of liabilities?

Debts or obligations that a company owes to others.

What is the cause and effect relationship between assets, liabilities, and owner's equity?

Assets minus liabilities equals owner's equity.

What is the definition of Accounts Receivables?

Open credits of customers normally for a short-term period.

What is the definition of Notes Receivables?

Written promissory notes of customers normally used for long-term credit.

What is the definition of Supplies?

Supplies on hand or unused by the firm that are material in amount.

What is the definition of Prepaid Expenses?

Advance payments for goods or services to be received in the future. Examples are prepaid insurance and prepaid rent.

What is the definition of Furniture?

Movable items used to furnish an office generally for a long-term period.

What is the definition of Equipment?

Battery or electrically driven instruments, or tools used in providing goods or services generally for a long-term period.

What is the definition of Advances from Customers?

Amount received from customers before providing goods or services.

What is the definition of Accounts Payable?

Open credit from vendors or suppliers normally for a short-term period.

What is the definition of Notes Payable?

Written promissory notes of the firm normally used for long-term credit.

What is the definition of Loans Payable?

Debt or credit acquired by the firm usually from banks or lending institutions.

What is the definition of Salaries Payable?

Unpaid salaries or wages of employees.

What is the definition of Utilities Payable?

Amount owed by the firm for utilities such as electricity, water, and gas.

What are the sources of funds acquired by a firm?

They are usually acquired from banks or lending institutions.

What is the definition of Salaries Payable?

It refers to the unpaid salaries or wages of employees.

What is the definition of Utilities Payable?

It refers to the unpaid power, water, or communication cost consumed by the firm.

What are the four categories of Owners' Equity?

They are Capital, Drawing, Revenue, and Expenses.