REVIEWER

IN
ACCOUNTING
Modern bookkeeping can be traced from the book Summa de Aritmetika written
by this author
Luca Pacioli

Your wealth or net worth will deteriorate if you *

borrow to pay your debts.
overspend
live beyond your means

Accounting does this for you, except

prepares a progress report on financial status of employees

analyses, calculates (or measures) and records financial activities of the firm.
prepares tax report of the firm
prepares a managerial report and recommends courses of actions

Statement users need accounting to be able to

minimize losses
make sound decisions
prepare reports
Interpret the results of the reports

The reports prepared in Accounting

Financial Statement
Debts or obligations owing to outsiders such as the banks and suppliers. *
Liabilities
An economic unit which buys and sells goods or services. *
Business

Amount paid for telephone and electric power services received by the business.
*
Expenses

A flourishing business should do or be all of these except *

generates profit which in turn increases its assets
contributes to government officials to protect its vested interest
pays more taxes to the government based on profit generated
creates more job opportunities

Jewelries, cars, cash and other properties or resources owned by the business. *
Assets

Effect of profit if you put up a business *

assets will increase so will net worth.
assets will increase so will liabilities.
assets, liabilities and net worth will all increase.
debts can be paid but net worth will decrease.

A quantitative plan prepared to show how resources such as money should be

spent wisely and productively. *
Budgeting

An endeavor, like a business, has always an element of uncertainty. *

Business Risk

The best way to make your money grow is to *

Keep it safe at home
Use it to buy car.
Use it for a business venture.
save it by opening a bank a account.

Receipts for goods sold or services rendered. *

Revenues

Financial status measured in wealth or assets owned less liabilities owed. *

Net Worth
A service activity that records transactions of the business and prepares a
progress report about its financial position and result of operation. *
Accounting

The primary motive of a business. *

Profit

The regular routine work in accounting which includes gathering, measuring,

recording and classifying transactions. *
Bookkeeping

Bookkeeping does this for you except *

Analyzes, measures and records all financial transactions
Tracks down business activities which must be documented.
make economic decisions for users
prepares reports

Primary source of capital of a business *

Owner’s Investment

Primary reason for preparing financial report in accounting. *

Decision Making

Sharing profits *
Partnership

Greater management expertise *

Corporation

Owner has total control *

Sole Proprietorship

Limited liability *
Corporation

Inexpensive to establish *
Sole Proprietorship

Greater business continuity *

Corporation

Few government regulations *

Sole Proprietorship

Greater access to capital *

Corporation

Easy transfer of ownership *

Corporation

Easy to set up dissolve *

Sole Proprietorship

Investment made by the owner will *

increase both assets and liabilities

increase both assets and owner's equity

decrease both assets and liabilities

decrease both assets and owner's equity

Payment of owner's liability out of the cash of the business *

decreases liabilities and increases owner's equity

does not affect the business

decreases both assets and liabilities

decreases both assets and owner's equity

The payment of cash to the bank for money borrowed by the business will *

decreases assets and liabilities

decreases assets and owner's equity

increases assets and liabilities

increases assets and owner’s equity

Purchasing supplies for cash *

decreases assets and liabilities

does not affect total assets

increases assets and liabilities

increases assets and decreases liabilities

The owner of the grocery store took home a loaf of bread and a bottle of milk
from the grocery's shelf. It was not recorded by the accountant. This *

is not a business transaction

will understate the assets of the business,

will understate assets and owner's equity

will overstate assets and owner's equity

At the beginning of the year, the liabilities of Caltex Service station amounted to
P120,000 but it decreased by P50,000 during the year. The assets increased by
P160,000 during the year and at the end of the year amounted to P360,000. The
owner’s equity at the start of the year is *

P1060,000

P80,000

P240,000

P260,000

P200,000

The assets of the business at the start of the month is P1,000,000 and the owner’s
equity is P800,000. Equipment worth P500,000 were purchased during the month
of which only P150,000 were paid for At the end of the month, owner’s equity will
become *

P550,000

P1,150,000

P800,000
P1,000,000

An accounting concept that disallows the presentation of the personal assets and
liabilities of the owner in the statement of financial position of the owner's
business. *

Entity

An accounting concept that requires assets to be recognized the date when the
assets were acquired by the business *

Cost

A transaction caused a P10,000 decrease in total assets This could have been
due to a/an *

payment of a note

Transactions must be supported by documents such as an official receipt

received from the school by the parent for tuition fee paid.

Objectivity Principle

A service provided now although not paid by your client should be immediately
recorded as a revenue. *

Accrual principle
Recording assets received requires the use of an exchange price

Cost Principle

An expression showing equality of assets on one hand and claims of creditors

and investors in the other hand.
Accounting Equation

Emy has two businesses: a travel agency and an internet shop. She has to
maintain two separate sets of books to record the activities of her businesses.
Entity Principle

Financial reports are prepared by the accountant after every twelve months. *
Reporting Period

A business is assumed to have an indefinite existence *

Going Concern

Basic concepts, rules and assumptions use as guide in the preparation of

reports.

Accounting Principles

A tool or device used to represent each asset, liability, net worth, revenue or
expense *

Account

All business transaction must be measured in terms of money. *

monetary principle

Dual effect of a transaction which is also called double entry bookkeeping *

Venetian Model

Three features of a business transaction includes the following except *

two parties are involved

information may be financial or non-financial

exchange of values

in terms of money

One of these features is not applicable for an asset.

It is a thing of value owned by the business

It may have physical form (tangible) or may represent a right (intangible).

Benefit for this has already been received.

This is expected to have a long life.

The financial structure may be stated in the following accounting equation except
*

Assets = Claims of Creditors and Owners

Assets - Creditors' Claims = Owner's Equity

Assets = Liabilities + Equity

Assets = Owner’s Equity

One of these is not a transaction that can be recorded by the accountant *

Ordered supplies from National Company Gave an advance payment of P2,500,

Owner took home some goods costing P500 for personal use.

Two employees were hired and signed a six-month contract for P50,000

Money borrowed from the bank was used to purchase

The owner’s equity account contains two major components:

owner's drawing and owner's capital

Increase in assets may be a result of *

a decrease in another asset

an increase in owner's equity

An increase in liability

all of these

Purchasing supplies for cash *

decreases both assets and liabilities

increases both assets and liabilities

does not affect total assets

increases assets and decreases liabilities

The company’s assets are P12,000,000 of which 1/3 represents owner’s equity.
How much is total liabilities?

P8,000,000

The assets of the business at the start of the month totalled P1,000,000 with
owner’s equity at P800.000 Before the month ended equipment P500,000 were
purchased, with a down payment of P150,000, the balance on credit. At the start
of the month, liabilities are *

P200,000

The assets of the business at the start of the month totalled P1,000,000 with
owner’s equity at P800.000 Before the month ended equipment P500,000 were
purchased, with a down payment of P150,000, the balance on credit. At the end of
the month, liabilities are

P550,000

A transaction caused a P10,000 decrease in total assets. This could have been
due to a/an *

payment of a loan

Allen Nature Trip, a travel agency, purchased equipment for P120,000, made a
down payment of P50,000 and signed a note for the balance. This transaction will.

not affect owner's equity

On January 1, the assets were P500,000 and the liabilities were P200,000 During
the year the assets increased by P100,000 and the liabilities decreased by
P50,000. Owner's equity on January I was

P300,000
On January 1, the assets were P500,000 and the liabilities were P200,000 During
the year the assets increased by P100,000 and the liabilities decreased by
P50,000. Owner's equity on December 31 was *

P450,000

The firm regularly prepares and presents financial statements for two periods- the
current year and the preceding year It follows the qualitative characteristic of

Comparability

The accountant submitted audited financial statements to the stakeholders duly

certified by an independent CPA that these are in conformity with generally
accepted accounting principles It follows the qualitative characteristic of *

Reliability

The accountant prepares and distributes general purpose reports common to all
users based on the qualitative characteristic of *

Neutrality

In preparing performance reports, the accountant uses a cut-off of 5% and

reports only those cost and expenses over and above this percentage following
the rule of *

Materiality
Controlled resources of an enterprise resulting from past events and for which
economic benefits are expected to flow to the enterprise *

Assets

Present obligations of a firm arising from past events, expected to decrease the
assets when it will be the liquidated in the future *

Liabilities

The owner wrote on a piece of paper electric bill that supposedly was incurred by
the firm. The accountant refused to reimburse the owner and record this as
business expense *

Objectivity