Accounting and Its Environment | 51. SS NAME: SCORE: ‘SECTION: PROFESSOR: Fill in the Blanks 4; Accounting is a process of recording, analyzing, and reporting of financial information to the stakeholders of the businesses, An activity carried out by a business to provide goods and services in exchange for moneyisknown asa Only business activities that can be measured in dollars and cents are recorded. This is in accordance with the concept. Personal financial activities of the owner of a business are not recorded in the books of the business. This complies with the concept. Transactions are recorded based on reliable and verifiable information. This is in accordance with the concept. Transactions should be recorded in the accounts at their original cost shown in the source documents. This practice complies with the concept.unting and Reporting 2021 Edition by Prof. WIN Ballada NAME: | SCORE: SECTION: I PROFESSOR: True or False 1. Accountin ccterized as the "language of business". 2. A partnership is @ business owned and operated by two or more persons who bind 6. 7. 8. % 12. 13. 14. 15, 16. 17, 18, 19. 20. 21. 22. to contribute money, property or industry to a common fund, with the the profits among themselves. Philippine eccountant considers peso as the common unit of measure for af] business transactions. ig Purposes, a business and its owner are considered one and the same, ition reduces the effects of numerous transactions into useful groups or themselv categories. The liability of corporate stockholders is limited to the amount of their investment. The terms bookkeeping and accounting are synonymous. Most members of the accountancy profession are Certified Public Accountants. A corporation is an economic unit that is legally separate from its owners. ‘The personal liability of a partner is limited to the amount of his investment. Manufacturing companies buy raw materials, convert them into products and then sell the products to other companies or to final consumers, The entity concept states that the transactions of different entities should not be accounted for together. A partnership is always owned by two individuals. For reporting purposes, the personal assets and debts of a business owner should be combined with the assets and debts of the business. Government accounting deals solely with the identification of the sources of resources consistent with laws. ‘ All members of the accountancy profession are Certified Public Accountants. Accounting is 2 service activity whose function is to provide quantitative information, about economic entities that is intended to be useful in making economic decisions. A corporation is a business owned by its stockholders. A separate legal entity organized in accordance with codes and laws and in which ‘ownership is divided into shares of stock is referred to as a corporation. An audit is the independent examination that ensures the fairness and reliability of the reports that management submits to users outside the business entity. A business transaction is the occurrence of an event or of a condition that must be recorded, One characteristic of a corporation is that its owners are personally liable for any losses incurred by the business. The set of guidelines and procedures that constitute acceptable accounting practice at 2 given time is GAAP, which stands for generally accepted accounting process. Classification reduces the effects of numerous transactions into useful groups oF categories.Accounting and Its Environment | 53 ‘NAME: SCORE: ‘SECTION: PROFESSOR: Multiple Choice 1. The concept assumes that the business has an indefinite economic life. accounting entity accounting period going concern objectivity aoe 2. Which form of business organization is characterized by limited liability? Sole Proprietorship Partnership, Corporation Both sole proprietorship and partnership aes 3. Which of the following processes best defines accounting? Measuring economic activities Communicating results to interested parties Preventing fraud Both a and b. pegs 4. To which area of accounting are generally accepted accounting principles primarily relevant? Managerial Accounting Financial Accounting Tax Accounting Financial Reporting To all Regulatory Agencies aose 5. Which of the following is not one of the three types of business activities? Investing Financing Marketing Operating aose54 | Basie Financial Accounting and Reporting 2022 Eaition by Prof. WIN Ballado 6 Which of the following processes is considered bookkeeping? a. Analyzing b. Reporting c. Recording d. Summarizing 7. Krishna started a speech therapy center. He also sells professional books on speech development. What is the nature of his business? Support your answer with a reason. manufacturing . service a b. c._ trading d._ service and trading Which of the following is a trading business? 8. a. adinic b. alawfirm c. apharmacy d.atelecommunications company 9. Which of the following statements is false? a. A sole proprietor has limited risk with respect to the amount of resources he invests in his business. b. Asole proprietorship has only one over. cc. Asole proprietorship is easy to set up. d. Asole proprietorship may not be able to obtain loans easily. 10. A business which prepares financial statements every year is following the concept. \ a. accounting entity b. periodicity ¢. going concern d. objectivityAccounting ond Its Environment | 55 NAME: SCORE: SECTION: [ PROFESSOR: Multiple Choice 1. Assets are usually valued under which basis? a. Replacement cost b. Historical cost c. Netrealisable value 2. Which of the following best explain the feature of consistency of presentation? a. When preparing the accounts of a firm, one should normally account for similar items in the same way from one accounting period to the next. b. Firms in the same industry must account for similar items in the same way. c. Firms must comply with accounting standards and regulations. d. None of the above. 3. Which of the following statements about accounting concepts and the characteristics of financial reporting information is not correct? (i) Entities may exclude information that is felevant in financial statements because it is too difficult for the users to understand. _ (ii) The historical cost concept means that only items capable of being measured in monetary terms can be recognized in the financial statements. (il) Consistency in use of the same accounting policies for the same or similar items from one period to the next is essential to enhance comparability among the entities. a. (i) and (ji) b. (i) and (ii) cc (il)and (ii) d. Allof the above 4. Which type of business organization is owned by its stockholders? a. Corporation ‘ b. Partnership : c. Proprietorship d, All the above are owned by stockholders56 | Basic Financial Accounting and Reporting 2021 Edition by Prof. WIN Ballada 5. Which of the following are true of partnerships? Is 2, 3 a b. c 4. The partners’ individual exposure to debt is limited. Financial statements for the-partnership by law must be produced ‘and Made public. Apartnership is riot 2 separate legal entity from the partners themselves, Land 2 only 2only 3only and 3 only 6. Which accounting concept should be considered if the owner of 2 business takes goods from inventory for his personal use? a b. « d. The substance over form concept The accrual concept The going concern concept The business entity concept 7. Which accounting concept states that omitting or misstating this information could influence users of the financial statements? ° a: b. e d. The consistency concept * The accrual concept The materiality concept The going concern concept 8. Which of the following accounting concepts means that similar items should receive a similar accounting treatment? a b. c d. Going concern Accrual Substance over form ConsistencyAccounting and its Environment | 57 NAME: SCORE: ‘SECTION: j PROFESSOR: Multiple Choice 1. Proponents of historical costs maintain that in comparison with all other valuation alternatives for general purpose financial reporting, statements prepared using historical costs are more a. objective. b. relevant. ©. indicative of the entity's purchasing power. d. conservative. 2. The records of properties acquired and services availed of by a business are Maintained in accordance with the &. business entity concept. b. cost principle. ¢. proprietorship principle. d. matching principle. 4 3. This principle requires relevant information to form part of financial statements for decision-making purposes. a. objectivity b. materiality . ©. adequate disclosure da accounting entity 4. The principle of objectivity includes the concept of a. summarization. b. verifability. © classification . conservatism. 5. The concept of matching is best demonstrated by not recognizing any expense unless some revenue is realized. recognizing prepaid rent received as revenue. associating effort with accomplishment. establishing an allowance for possible market decline in inventory account. aose58 | Basic Financial Accounting and Reporting 2021 Edition by Prof. WIN Ballada 6. Accounting changes are often made and the monetary impact is reflected in the financial statements of an entity even though, in theory, this may be a violation of the accounting concept of materiality. objectivity. conservatism. consistency. enoe 7. The periodicity concept requires that all companies prepare monthly, quarterly and annual financia) statements. b. results from the Bureau of Internal Revenue requirement that taxable income be reported on an annual basis. requires all companies to use a fiscal year ending December 31. d. involves dividing the life of a business entity into accounting periods of equal length thus enabling the financial users to periodically evaluate the results of business operations. a. 8. They encompass the conventions, rules, and procedures necessary to define what is accepted accounting practice. Accounting assumptions Accounting concepts Conceptual frameworks Generally accepted accounting principles aooo 9. The Filipino accountants should possess knowledge to enable them to compete internationally, they are: a. General knowledge b, Organizational and Business Knowledge ¢. Information Technology Knowledge d. Accounting Knowledge e. All of the above. 10. Which of the following best describes the attributes of a partnership? a. Limited ability to raise capital; unlimited personal liability of owners. b. Limited ability to raise capital; limited personal liability of owners. c. Ability to raise to raise large capital; unlimited personal liability of owners. d. Ability to raise large amounts of capital; limited personal liability of owners. 41. The concept of the accounting entity is applicable a. only to the legal aspects of business organizations. b. only to the economic aspects of business organizations.12. 13. 14. 15, 16. Accounting and Its Environment | 59 ¢. only to business organizations. d. whenever accounting is involved. The measurement phase of accounting is accomplished by a. storing data b. reporting to decision makers. ©. recording data, d. processing data. ‘A person applying for examination shall establish the following requisites to the satisfaction of the Board that he: a. isa Filipino citizen; b. is of good moral character; c. is a holder of the degree of Bachelor of Science in Accountancy conferred by a school, college, academy or institute duly recognized and/or accredited by the Commission on Higher Education (CHED) or other authorized government offices; and d._ has not been convicted of any criminal offense involving moral turpitude. e. “a” and “c’ only. f. “a, "b” and “c”, 8. Allofthe above. The main function is to establish and improve accounting standards that will be generally accepted in the Philippines. Financial Reporting Standards Coun Professional Regulation Commission i Philippine Institute of CPAs Board of Accountancy aoe Which area of public accounting means the examination of financial statements by CPA for the purpose of expressing an opinion as to the fairness of the statements? a. Management advisory services b. Taxation c. Internal auditing d. External auditing Accountants do not recognize that the value of the peso changes over time. This concept is called the . ‘a. stable monetary unit concept. b. going concern concept. . cost principle, d. entity concept.60 | Basic Financial Accounting and Reporting 2021 Edition by Prof. WIN Ballada 17. 18. 19. 20. 21. The following documents shall be submitted in support of the requirements j " in previous question except the the Certificate of Live Birth in National Statistics Office (NSO) security paper, Marriage Contract in NSO security paper for married female applicants. College diploma with date of graduation and Special Order Number. School Identification Card. Baccalaureate Transcript of Records with date of graduation and Special Order Number. f. National Bureau of Investigation (NB!) Clearance. paooe The basic purpose of accounting is 2. To provide the information that the managers of an economic entity need to control its operations. b. To provide information that the creditors of an economic entity can use in deciding whether to make additional loans to the entity. To measure the periodic income of the economic entity, d. To provide quantitative financial information about a business enterprise that is useful in making rational economic decision. 9 During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with which basic accounting concept? objectivity periodicity conservatism matching pose The skills needed to be developed by Filipino accountants include the following a. Intellectual skills. b. Interpersonal skills. cc. Communication skills. d. “a” and “c” only. e. “a,b” and "c". Which of the following accounting concepts states that ah accounting transaction should be supported by sufficient evidence to allow two or more qualified individuals to arrive at essentially similar conclusion? matching objectivity periodicity stable monetary unit SP PeAccounting and Its Environment | 61 ———— 22. The financial statements should be stated in terms of a common financial denominator. Accrual Going concern Time period Stable monetary unit aos 23. Stating assets and liabilities and changes in them in terms of a common financial denominator is a prerequisite in measuring financial position and periodic net income. unit of measure , measurement of economic resources and obligations exchange price |. actrual aege 24. Carrying out professional responsibilities diligently and in accordance with applicable technical and professional standards is descriptive of the principle of 2. professional competence and due care. b. objectivity. c. independence. d. integrity. 25. A professional accountant should be straightforward and honest in all professional and business relationships. This is in consonance with the fundamental principle of a. integrity, b.. objectivity. ¢. confidentiality. d. professional competence and due care. 26. Which of the following is an appropriate definition of accounting? - a, The measurement, processing, and communication of financial information about an identifiable economic entity ‘A means of recording transactions and keeping records c, The interconnected network of subsystems necessary to operate a business d. Electronic collection, organization, and communication of vast amounts of information 27. Accountants employed by a particular business firm or not-for-profit organization, perhaps as chief accountant, controller, or financial vice president, are said to be engaged in a. general accounting. b, public accounting.62 | Basic Financial Accounting and Reporting 2021 Edition by Prof. WIN Ballada SE ¢. practice in commerce and industry. d, independent accounting. 28. The entity concept means that a. Because a firm is separate and distinct from its owners, those owners cannot have access to its assets unless the firm ceases to trade, b. Accounts must be prepared for every firm. ¢. The financial affairs of a firm and its owner are always kept separate for the purpose of preparing accounts. d. None of the above. rocess provides:information about economic activities of 29. The financial accounting ied accounting period that is shorter than the life of the an enterprise for a spe: enterprise. a. time period b. going concern ¢. measurement of economic resources and obligations d. measurement in terms of money 30. The consistency concept means that When preparing the accounts of a firm, one should normally account for similar items in the same way from one accounting period to the next. b. Firms in the same industry must account for similar items in the same way. cc. Firms may never change the way in which they prepare their accounts. d. Norrie of the above. 31. The consistency standard of reporting requires that expenses be reported as charges against the period in which they are incurred. a b. the effect of changes in accounting upon income be properly disclosed. c. extraordinary gains and losses should not appear on the income statement. d. accounting procedures be adopted which give a consistent rate of return. Which accounting process is the recognition or non-recognition of business acti as accountable events? 32. a. Identifying b. Communicating c. Recording d. Measuring