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WorksheetsFundamentals of Accounting Quiz
Total questions: 104
Worksheet time: 2hrs 45mins
What is accounting according to the Accounting Standards Council (ASC)?
A service activity that provides quantitative information.
A method of recognizing and communicating economic details.
A system designed to identify and process economic information.
An art of recording and classifying transactions.
What are the main functions of accounting?
Recording, Classifying, Summarizing, Analyzing, Communicating
Recording, Classifying, Reporting, Auditing
Recording, Summarizing, Taxing, Budgeting
Classifying, Analyzing, Reporting, Communicating
What is the primary focus of financial accounting?
Preparation of general-purpose financial statements.
Internal management decision-making.
Government resource allocation.
Tax collection and valuation.
What does management accounting primarily assist with?
External reporting to stakeholders.
Internal decision-making for management.
Tax compliance and reporting.
Auditing financial statements.
What is the role of government in accounting?
Concerned with taxes and compliance with regulations.
Focus on financial performance of businesses.
Oversee the auditing process.
Provide financial statements to the public.
What is the significance of accounting education for CPAs?
It is a requirement to take the licensure examination.
It helps in understanding tax regulations.
It is necessary for auditing practices.
It is not essential for a CPA's career.
What is the primary concern of tax accounting?
Proper measurement of taxes owed by entities.
Preparation of financial statements.
Internal management reporting.
Auditing financial records.
What does internal auditing focus on?
Operational efficiency and effectiveness.
External financial reporting.
Tax compliance.
Preparation of financial statements.
What is the historical significance of Fra Luca Pacioli in accounting?
He is considered the father of accounting.
He developed the first accounting software.
He was the first to audit financial statements.
He created the first financial statement format.
What is the purpose of the accounting cycle?
To ensure reliable and relevant financial information.
To prepare tax returns.
To classify financial transactions.
To audit financial statements.
What is the main objective of external auditing?
To express an opinion on the fairness of financial statements.
To prepare financial statements.
To assist in internal management decisions.
To ensure compliance with tax regulations.
Who are the potential users of financial statements?
What is the overall objective of financial reporting?
What does the Accrual Basis in accounting mean?
The Accrual Basis in accounting means Under this basis, the effects of transactions and other events are recognized when they occur and not as cash or its equivalent is received or paid on the period to which they relate.
What is the basic accounting equation?
What is a T-account?
Since the accounting equation says that the Total asset is equal to Total liabilities and Equity. We can assume that if the total liabilities and equity is 1,000,000, thus the total asset is also 1,000,000. Checking: Assets = Liabilities + Equity Assets = 500,000 + 500,000 1,000,000 = 1,000,000
Since the accounting equation says that Total asset is equal to Total liabilities and Equity. We can assume that the total liabilities and equity is equal to 2,000,000. (2,000,000 – 1,500,000 = 500,000) Checking: Assets – Equity = Liabilities 2,000,000 – 1,500,000 = 500,000 2,000,000 = 1,500,000 + 500,000 2,000,000 = 2,000,000
Since the accounting equation says that Total asset is equal to Total liabilities and Equity. We can assume that the total liabilities and equity is equal to 2,000,000. (2,000,000 – 300,000 = 1,700,000) Checking: Assets – Liabilities = Equity 2,000,000 – 1,700,000 = 300,000 2,000,000 = 1,700,000 + 300,000 2,000,000 = 2,000,000
What is the primary purpose of managerial accounting?
To provide information for internal decision-making.
To prepare financial statements for external users.
To ensure compliance with financial regulations.
To conduct external audits.
What is the significance of Generally Accepted Accounting Principles (GAAP)?
They provide a framework for financial reporting.
They are only applicable to tax accounting.
They are guidelines for internal auditing.
They are used exclusively by government entities.
What is the main difference between cash basis and accrual basis accounting?
Cash basis is more complex than accrual basis.
Cash basis is used for tax purposes, while accrual basis is used for financial reporting.
Cash basis recognizes revenue when cash is received, while accrual basis recognizes revenue when earned.
There is no significant difference between the two methods.
A system designed to identify, collect, process, measure and communicate economic information about the business entity to those users having interest in the financial affairs of the entity.
Decision Making
Financial Nature
Quantitative Information
Accounting
According to the Accounting Standards Council (ASC), accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about finances, about economic entities, that is intended to be useful in making economic decisions.
Accounting Cycle Process
Service Activity
Standards of Discipline
Art of Accounting
American Accounting Association (AAA) describes accounting as the method of recognizing, appraising and communicating economic details to permit informed judgment and decision by users of the information.
Recognizing, Appraising and Communicating
The American Institute of Certified Public Accountants (AICPA) defines accounting as the art of recording, classifying, and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof.
The American Institute of Certified Public Accountants Art of Accounting
Accounting provides quantitative information, focusing on economic events that are quantifiable and measurable in terms of money.
Quantitative Information
Accounting information is financial in nature, with financial accounting reports primarily being financial.
Quantitative Information
Art and Science of Accounting
Decision Making
Financial Nature
Accounting information is financial in nature, with financial accounting reports primarily being financial.
Quantitative Information
Decision Making
Financial Accounting
Financial Nature
Accountants follow certain standards in performing their professional services, similar to other professionals like lawyers and engineers.
Accountants follow Standards of Discipline.
Accounting as an art follows certain style to make its reporting more meaningful, while as a science it follows a systematic process before producing financial statements.
It is called art and science of accounting.
The coherent system of accounting is condensed into the accounting cycle process, which is a step-by-step procedure to attain reliable and relevant information.
Accountants are concerned with providing professional services to clients rather than engaging in the actual business of the company.
Through financial statements, accounting serves as the language of business, allowing different users to seek assistance for their individual needs.
The basic function of accounting, focusing on ensuring all business transactions of at least financial in nature are completely recorded in an acceptable manner.
Recording is done in the books of original entry, known as the ________
_______ is concerned with the systematic analysis of journalized data to group transactions or entries of one nature into a certain account.
Classifying of transactions into accounts.
The work of classification is completed in a book known as the _____
This involves presenting and condensing the classified data in a system manner which is understandable and useful to the internal as well as external end users of accounting statements.
Summarizing
This is the final end-function of accounting. The recorded, classified and summarized financial data is analyzed and interpreted in a manner that the end-users can make a meaningful judgment about the conditions, stability, and profitability of the business operation.
The accounting information after being meaningfully analyzed and interpreted has to be communicated in a proper form and manner to the proper person. This is done through preparation and distribution of accounting reports, which include besides the usual income statement and the balance sheet, additional information in the form of accounting ratios, graphs, diagrams, funds flow statements etc.
__________ is the discipline of accounting concerned with recording and classifying business transactions concluding to the preparation of general-purpose financial statements. This branch of accounting is mainly concerned on the reports on the entity's financial position (its resources and claims), financial performance (income and expenses), and the changes in a particular owners' equity.
The main objective of _________is to provide assistance to the internal users of financial information particularly the management in doing economic decisions such as planning, controlling, and strict implementation of the plan.
management accounting
This branch of accounting is mostly focused on the allocation of the resources and funds of the National Government. It basically reports on the income and expenditures of government, the allotment to different Departments (DOH, DepEd, DBM, etc.), agencies and projects.
External ______ primarily focuses on the systematic, coherent and critical examination of financial statements by an independent Certified Public Accountant. Using the professional judgment and skepticism of the external CPA, the main objective of external auditing is to express an opinion by issuing an _____ report regarding the fairness of the contents of the financial statements in accordance with the given reporting standards.
__________ deals with determining the operational efficiency and effectiveness of the company regarding protection and safeguarding of the company's assets, accuracy and reliability of the accounting data, and adherence to prescribed managerial policies set by the Board of Directors.
Concerned with the proper measurement of the amount to be paid by one entity or individual, essential for funding government operations and infrastructure.
Taxation Accounting
Investments Accounting
Donations Accounting
Subsidies Accounting
A form of managerial accounting that aims to capture a company's total cost of production by assessing variable and fixed costs.
A professional field for Certified Public Accountants, requiring a Bachelor of Science in Accountancy to take the licensure examination.
Accounting Education
Concerned with taxes paid by entities based on reported net income and compliance with regulations.
Tax compliance and reporting to government.
Users of financial statements who assess an entity's capability to pay long-term and short-term obligations.
Creditors and lenders
Users of financial statements concerned with earning power and return on investment in a company.
Users of financial statements that focus on growth status and potential downfall, using data to predict future and apply corrective actions.
Management
Users concerned with the pros and cons of a company's operations and its corporate social responsibility.
Public
Management
The increase in the owner's capital as a result of business operations or the company's net income at the end of one period.
Profitability
Owner's Drawing
Expenses
Revenue
The availability of cash that an entity has to meet currently maturing obligations and sustain business operations.
Profitability
Owner's Drawing
Liquidity
Revenue
The capacity of an entity to sustain growth and meet future expansion requirements.
Profitability
Stability
Liquidity
Revenue
The availability of cash that an entity has to meet long-term obligations.
Solvency
The source of financing for a company, including external financing from creditors and internal financing from investors and owners.
Whether the company has excess cash after satisfying claims and obligations to meet additional investment and contingency requirements.
Yes, the company has Financial Flexibility.
A complete document promulgated by the International Accounting Standards Board summarizing terms and concepts underlying financial statement preparation for external users.
Composed of ideas, concepts, and assumptions that underlie the preparation and presentation of accounting information for external users.
Conceptual Framework Composition
To provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.
To provide Overall Objective of Financial Reporting to investors.
Readers should realize that they cannot know the precise meaning of many items in an accounting report unless they know which of the several equally acceptable possibilities has been selected by the person who prepared the report.
The precise Meaning of Accounting Report
The solid foundation of accounting to permit understanding and enhance the usefulness of the financial statements.
Accounting Assumptions
To identify proper accounting practices for the preparation and presentation of financial statements and create common understanding between the preparers and users of financial statements particularly the measurement of assets and liabilities.
Adherence to established Purpose of Accounting Standards.
The recognition of receivables for the sale of goods or services even though cash is not yet received.
The __________ for the purchase of goods or services even though cash is not yet paid.
Recognition of Payables
The recognition of expenses for expenses paid in advance and not yet consumed.
(a) The recognition of expenses for expenses incurred but the expense is not yet paid. (b) The recognition of income for cash received but the income is not yet earned. (c) The recognition of income for income earned but the income is not yet received. (d) Financial statements are normally prepared on the assumption that an enterprise will continue in operation for the near future.
(a) Under the Measurement of the Elements of Financial Statements, assets are recorded at an amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of acquisition. (b) This assumes that the business enterprise is separate from the owner, managers, and employees who constitute the firm. (c) This concept requires that the indefinite life of the enterprise be divided into equal intervals of time called time period or accounting period for the purpose of preparing financial reports on financial position, performance, and cash flows. (d) This speaks of the ability to quantify the assets, the liabilities, and the capital in terms of a unit of measure.
(a) The unit of measure used in the Philippines is peso. (b) The basic accounting equation can be explained by how resources (assets) of a company are being acquired. (c) External financing means resources are acquired on credit (liability). (d) Internal financing by means of investment (equity) of other person to the entity.
Case 1 Asset Calculation With the equation that Asset = Liabilities + Equity (? = 500,000 + 500,000), we can say that the asset is (a) Case 2 Asset Calculation With the equation of Asset = Liabilities + Equity (2,000,000 = ? + 500,000), we can derive the formula to get the liabilities: Asset - Equity = Liabilities (2,000,000 - 500,000 = (b) ). Case 3 Asset Calculation With the equation of Asset = Liabilities + Equity (2,000,000 = 300,000 + ?), we can derive the formula to get the equity: Asset - Liabilities = Equity (2,000,000 - 300,000 = (c) ).
(a)
The residual interest in the assets of the entity after deducting liabilities.
(b)
A descriptive storage unit used to collect and store information of similar nature.
(c)
The process of incorporating in the financial statements an item that meets the definition of an accounting element and satisfies the criteria for recognition.
(d)
Properties of a business entity that can generate future economic transactions or events.
(e)
Obligations of the entity arising from past transactions that are expected to result in an outflow of resources.
(a)
The owner's equity in the business, representing the owner's investment and withdrawals.
(b)
Income earned from the sale of goods or services.
(c)
Costs incurred in the process of earning revenue.
(d)
Assets held for trading or expected to be realized or consumed within twelve months after the end of the period.
(e)
Assets that do not meet the criteria to be classified as current and are useful for a period longer than 12 months.
(a) Any medium of exchange that a bank will accept for deposit at face value. (b) Short-term highly liquid investments that are readily convertible to known amounts of cash. (c) Claims against customers arising from the sale of services or goods on credit. (d) Receivables from customers. (e) Receivables that are supported by promissory notes.
(a)
Claims from rental business.
(b)
Claims from earnings of interest.
(c)
Advances to employees.
(d)
The measurement of an entity's assets, liabilities, and equity at a specific point in time.
(e)
The measurement of an entity's income and expenses over a period of time.
(a)
A right that has the potential to produce economic benefit.
(b)
An asset that is currently controlled by the entity.
(c)
The requirements that an item must meet to be recognized in financial statements.
(d)
Involves assets, liabilities, and equity.
(e)
Involves income and expenses.
(a) Tangible assets such as buildings, offices, furniture, and equipment. (b) Goods available for sale or use in production. (c) Payments made in advance for goods or services to be received in the future. (d) Reports that summarize the financial position and performance of a business. (e) Claims against customers arising from sale of services or goods on credit.
(a) A valuation account which shows estimated uncollectible amount of accounts receivable. (b) The total amount of money owed to a business by its customers for goods or services delivered. (c) Accounts Receivable - Allowance for bad debts. (d) Assets which are held for sale in the ordinary course of business. (e) Goods held for sale by the trading or merchandising company.
(a)
Materials held for use in the production of finished goods of a manufacturing company.
(b)
Materials in process in the production area but not yet finished.
(c)
Finished product held for sale by the manufacturing company.
(d)
A current asset representing the cost of supplies on hand at a point in time.
(e)
Expenses paid in advance.
(a) Rental expense paid in advance. (b) Advance payment of insurance. (c) Advance payment in promotion. (d) Long term assets with physical substance. (e) Land area owned for business operation and not for sale
(a) Office building, factory, warehouse or store used in business operations. (b) Machinery, office equipment, computer equipment, delivery equipment and others. (c) Machines used in production or operations. (d) Transport equipment used for business operations. (e) Shelves, cabinets, tables, chairs, and others.
(a)
A valuation account representing the decrease in value of a fixed asset except for land.
(b)
(Cost of Building - Salvage value) / number of years.
(c)
Cost of Building - Accumulated depreciation.
(d)
Long term assets with no physical substance.
(e)
Authority or license given by the government to exclude others from making, using, or selling an invention.
(a) The asset that is not identifiable. (b) Intellectual property that gives the owner an exclusive right to make copies of creative works. (c) Intellectual property that consists of a recognizable sign, design, name, or expression. (d) Valuation account which represents the decrease in value of intangible assets. (e) Patents - Amortization
(a) The present "debts" or monetary obligations of a business. (b) Obligations or debts of the business which will be paid during the accounting cycle by means of payment of current assets or a creation of another current liability. (c) Obligations or debts of the business that will be due and payable beyond one year or 12 months.
Current Liability (PAS No.1) An entity shall classify a liability as current when it (a) in its normal operating cycle. Current Liability (PAS No.1) An entity shall classify a liability as current when it (b) primarily for the purpose of trading. Current Liability (PAS No.1) An entity shall classify a liability as current when the (c) within twelve months after the reporting period. Current Liability (PAS No.1) An entity shall classify a liability as current when the entity does not have an u (d) of the liability for at least twelve months after the reporting period.
(a) A current liability which refers to debts or obligation that arise from the acquisition of merchandise or services on account. (b) A payable supported by promissory notes, current if payable within a year. (c) Wages/salaries already served by the employees but not yet paid by the employer. (d) Utilities incurred but not yet paid. (e) Revenue received before it is earned.
(a) An amount borrowed to the bank by the company payable beyond one year. (b) Issued promissory notes payable beyond one year. (c) A long term liability account that refers to debt secured by a mortgage on real estate. (d) An amount obtained from lenders to finance the acquisition of equipment and other needed assets, obtained by issuing bonds. (e) The owner's capital in the business, the remaining amount or residual interest after deducting liabilities from the assets.
(a) The account used to record the original investment of the owner of the business entity. (b) The account used to record the additional investment of the owner of the business entity. (c) The account used to record the total balance capital of the owner of the business entity at the end of the accounting period. (d) When the owner of a business entity withdraws cash or other assets, such as recorded in the drawing. (e) A temporary account used at the end of the accounting period to close income and expenses, showing the profit or loss for the period before closing to the capital account.
(a)
Owner's Equity classification.
(b)
Partner's Equity classification.
(c)
Shareholder's Equity classification.
(d)
The revenue or earnings from the business operations such as sales of products or payments for services.
(e)
Owner's interest in the assets of a business after deducting liabilities.
(a) Income generated from business activities. (b) The amount of goods or inventory sold to customers. (c) The amount of assets sold other than inventory. (d) Income received by an individual from specific fields such as arts and sciences, doctors, accountants, lawyers, and architects. (e) The income received from rendering services.
(a) The income received from interest. (b) Income from rental. (c) The costs of operating the business. (d) The cost incurred to purchase or produce the products sold to customers during the period. (e) The expense incurred when the supplies are used
(a) Payment to employees such as salaries or wages, 13th month pay, cost of living allowances, and other related benefits. (b) The portion of premiums paid on insurance coverage which has expired. (c) The portion of the cost of tangible assets allocated or charged as expense during the accounting period. (d) The cost incurred in paying taxes. (e) The portion of the cost of accounts receivable allocated or charged as an expense.
(a) The expense incurred when the business pays the electricity, water, and telecommunication bills. (b) Other expenses paid or incurred by the business. (c) A record of account titles and control numbers used by the bookkeeper as a guide in recording business transactions. (d) The name of accounts to prepare the financial statement. (e) The number that represents the account title, which is different in every company.
(a) Set of books used to record all transactions or past events occurred in the business, especially those financial in nature. (b) The book of original entry where all business transactions are recorded for the first time. (c) A major type of book of accounts. (d) A book of original entry used to record business transactions in a small business, noted for its simplicity. (e) The practice of accounting for day-to-day quantifiable and measurable business transactions.
(a) A format of the General Journal that provides information such as the date of transaction, account titles affected, and brief explanations. (b) Used when the entries are posted and amounts are transferred to the related ledger account. (c) The first money column in the General Journal where the amount of the debit account is entered. (d) The second money column in the General Journal where the amount of the credit account is entered. (e) The method of recording business activities in chronological order, regardless of the nature of transactions.
(a) A book of final entry that accumulates all data necessary prior to the preparation of financial statements. (b) The method of transferring recorded transactions from the General Journal to the General Ledger. (c) The arrangement of transactions as they occur over time. (d) An example of a transaction that records multiple debits and credits in one journal entry. (e) Shows the account debited and credited along with a brief explanation of the transactions.
(a) Indicates the date of occurrence for each transaction in the journal. (b) The process of minimizing potential errors such as omissions in debit or credit entries. (c) The process that follows the accumulation of data in the General Ledger. (d) Rules that must be followed when moving information from the General Journal to the General Ledger. (e) A potential error that can have a material effect if not recorded in the ledger.
(a) The organization of transactions according to accounting elements such as assets, liabilities, capital, income, and expenses. (b) The significant impact that an error in recording can have on financial reporting. (c) A collection of accounts that summarizes all transactions related to a specific account. (d) The names of the accounts that are affected by a transaction. (e) A short description of the nature of the transaction recorded in the journal.
(a) Transactions that occur on the same day, which can be marked with a check (√) for clarity. (b) The significant consequences that can arise from recording errors in financial documents. (c) A complete record of transactions maintained in the order they occur. (d) Refers to the type of business activity being recorded, such as income realization or expense payment. (e) The last stage of recording transactions, where data is compiled for financial statements.
(a) The process of documenting business activities in the General Journal. (b) Should be transferred on the debit side of the ledger. (c) Should be transferred on the credit side of the ledger. (d) The basic form of a ledger, with the debit column on the right side and the credit column on the left side. (e) Arranged in accordance with the chart of accounts and has major parts including account title, debit side, and credit side.
(a) Divided into debit and credit sides, each having sections for date, particulars, folio or post reference, and amount. (b) Defines the nature of the ledger, summarizing all transactions involving specific accounts during a period. (c) Indicates the account number of the account titles listed in the chart of accounts, necessary for cross-referencing recorded transactions. (d) Books of original entry designed to record special types of business transactions or activities. (e) Used for entries of transactions not recorded in the special journals, including adjusting, closing, and reversing entries.
(a) Also known as 'sales on account journal', used to record several sales on account. (b) Posting of purchases account and accounts payable account is done monthly, transferred to the General Ledger. (c) Used to record receipts of cash from sources such as collection of accounts, owner investments, cash sales, and loans. (d) Records all payments whether in cash or by check, including payments of accounts and cash withdrawals by the owner. (e) The owner of a sole or single proprietorship, also known as the entrepreneur.
