1.

What is the process of identifying, recording, and communicating economic

events of an organization to interested users?

Accounting

2. What involves selecting economic events that are relevant to a particular

business transaction?

Identifying

3. What is a behavioral knowledge involving creativity and skill, making

accounting activity systematic with definite techniques requiring particular
skill and expertise?

Accounting is an art

4. Who is considered as the father of accounting in Europe?

Luca Pacioli

5. Which of the following is not an appropriate description of accounting?

Accounting is an exact science rather than an art.

6. Which of the following accounting processes comes first?

Identifying

7. What is the process of identifying, recording, and communicating economic

information useful in making economic decisions?

Accounting

8. What types of information are provided by accounting?

All of the above

9. What is a widely accepted set of rules, concepts, and principles in

accounting?

GAAP

10. Why are economic activities of a Philippine entity measured and reported
in the Philippine peso?

Monetary Unit Assumption

11. Why should the accounting practices and methods used by a company be
maintained and reported for specific, consistent periods?

Time-Period Assumption.

12. What accounting principle dictates that assets, liabilities, and equity
should be recorded at their original cost?

Cost Principles4

13. What principle requires business transactions to have impartial supporting

evidence or documentation?

Objectivity Principles4
14. Which of the following is not very important in the field of accounting,
especially regarding accounting principles?

Subjectivity principles4

15. What account should be debited when an agreement is made to receive a

service fee from customers?

A revenue

16. What is a descriptive storage unit used to collect and store information of
similar nature?

Account2

17. What represents open accounts showing the amount of money owed by
the business to creditors or suppliers?

Accounts payable2

18. Which term is not synonymous with equity (assets minus liabilities)?

Profit

19. Which of the following is NOT a source of legal obligation?

Other operation by law

20. How much is Lakay Lugawan's total equity if he has total assets of
₱115,000 and total liabilities of ₱12,500?

₱102,500

21. What is the difference between total debits and total credits for an
account, including any beginning balance?

Account balance

22. When does the sum of debits equal the sum of credits?

Zero Balance

23. What represents a ledger account used as a tool to understand the effects
of one or more transactions?

T-Account

24. What major account is used when purchasing table napkins for barbecue
operations?

An expense

25. What major account is used when paying James Reid to endorse a product?

An expense

26. What major account is used when considering the uncollectible portion of
accounts receivable?

An expense
27. What is a physical or digital record of formally-recorded transactions,
commonly referred to as the book of original entry?

Journal2

28. What book contains accounts where classified and summarized information
from journals is posted as debits and credits (also called the second book of
entry)?

Ledger2

29. Which journal should be used to record a customer's return of items

charged to their credit card?

General journal

30. Which journal is best for recording rent payment by check?

Cash disbursements journal

31. Which special journal is appropriate for recording a credit to Sales and a
debit to Cash?

Cash receipts journal

32. Which journal is applicable when debiting Ferrer Co. in the accounts
receivable subsidiary ledger?

Sales journal

33. What is an accounting entry that increases Assets and decreases

Liabilities and Owner’s Equity?

Debit

34. What is the accounting entry that decreases Assets and increases
Liabilities and Owner’s Equity?

Credit

35. Which of the following is considered a business transaction?

Paid salaries of employees.

36. Which journal should Sentro Vegie Shop use to record the sale of 500 kilos
of cabbage on credit?

Sales journal

37. Which of the following statements about debits and credits is not true?

If I want to decrease the revenue account, I will credit the revenue account.

38. What type of information is required to prepare financial statements, and

how does it include accounts for assets, liabilities, owners’ equity, revenues,
and expenses?

Ledger
39. What are the primary types of businesses, and how do they differ in their
operational focus and accounting practices?

Service, manufacturing, and merchandising

40. Which of the following is not part of the accounting cycle for a service
business, and why is it considered an exception?

Rules of Debit

41. How do the steps in the accounting cycle of a manufacturing business

differ from those of other types of businesses, specifically regarding Adjusting
Entries and Preparation of Basic Financial Statements?

ALL STATEMENTS ARE CORRECT

42. Which of the following accurately describes the accounting cycle of a

merchandising business, and what reasoning supports your choice?

Transactions  Preparation of Journal Entries  Posting  Unadjusted Trial

Balance

43. How can rendering service to a client amounting to P32,000 on account be

classified in terms of financial and non-financial transactions?

Rendering service to a client on account is a financial transaction because it involves

an exchange of value (the service) for a promise of payment (accounts receivable). This
transaction can be recorded in the accounting system as a debit to Accounts
Receivable and a credit to Service Revenue.

44. Explain how the purchase of P100,000 in transportation equipment affects

a business's financial statements. Why is this important?

The purchase of transportation equipment for P100,000 will increase the business's
assets (specifically, its fixed assets) by P100,000. If the purchase is made on credit, it
will also increase the business's liabilities (specifically, accounts payable) by
P100,000. This is important because it shows how the business is using its financial
resources to acquire assets that will help it generate revenue in the future. It also
demonstrates the business's ability to take on debt and manage its financial obligations.

45. How does hiring office personnel illustrate the distinction between
financial and non-financial transactions?

Hiring office personnel is a non-financial transaction because it does not involve an

immediate exchange of value. While the business incurs an expense for salaries, this
expense is not recorded until the employee works and earns their pay. The act of hiring
itself does not directly impact the business's financial statements.

46. How can business activities be described in terms of transactions and

events, and what examples illustrate this distinction?

Transactions and events

 Transactions are economic events that can be measured in monetary terms and
recorded in the accounting system. For example, purchasing inventory, selling
goods, paying salaries, and receiving payments from customers are all
transactions.
 Events are occurrences that may or may not be quantifiable in monetary terms
and may not be recorded in the accounting system. For example, hiring a new
 employee, launching a new product, or experiencing a natural disaster are all
events.

47. How do business transactions represent interactions between a business

and its stakeholders?

Business transactions represent interactions between a business and its stakeholders

because they involve exchanges of value. For example:

 Purchasing inventory from a supplier represents an interaction between the

business and its supplier.
 Selling goods to a customer represents an interaction between the business and
its customer.
 Paying salaries to employees represents an interaction between the business
and its employees.
 Receiving payments from customers represents an interaction between the
business and its customers.

48. Which of the following statements is TRUE about the relationship between
assets, liabilities, and equity, and how does maintaining the accounting
equation support financial stability?

Accounting equation must remain in balance after each transaction.

The accounting equation states that Assets = Liabilities + Equity. This equation
represents the fundamental relationship between a business's resources (assets), its
obligations to others (liabilities), and the owners' investment in the business (equity).
Maintaining this balance after each transaction ensures that the financial position of the
business is accurately reflected.

49. Why is it essential to keep the accounting equation in balance during the
recording of business transactions, and what could happen if this balance is
not maintained?

It is essential to keep the accounting equation in balance because it ensures that the
financial records of the business are accurate and consistent. If the equation is not
balanced, it could indicate errors in recording transactions, which could lead to incorrect
financial statements and poor decision-making.

50. What principle dictates that the business should record the clothing
machine at its acquisition cost of Php 180,000.00 instead of its regular selling
price? Why is this principle crucial for accurate financial reporting?

The Cost Principle dictates that the business should record the clothing machine at its
acquisition cost of Php 180,000.00 instead of its regular selling price. This principle is
crucial for accurate financial reporting because it ensures that assets are recorded at
their historical cost, which is a verifiable and objective measure. Using the selling price
would be subjective and could fluctuate based on market conditions, making financial
reporting unreliable.