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Questions and Answers

What is the purpose of the GENERAL JOURNAL in accounting?

To summarize financial information for stakeholders

To record raw accounting entries in sequential order by date (correct)

To prepare the Profit & Loss Statement

To group financial transactions into categories

Which statement best describes the role of the LEDGER?

It is used solely for cash transactions.

It formalizes the recording of assets, liabilities, owner's capital, revenues, and expenses. (correct)

It serves as a temporary record for financial transactions.

It tracks all business activities including sales and purchases.

Which of the following statements is TRUE regarding financial statements?

They present information solely on financial transactions.

They are only concerned with income generation.

They can lead to dissatisfaction among users due to misrepresentation. (correct)

They always indicate a company's profit.

How are financial transactions classified in accounting?

Into assets, liabilities, income, or expenses Signup and view all the answers

What is depicted in the Profit & Loss Statement?

The expenses and income of the company Signup and view all the answers

What type of information is found in the Balance Sheet Statement?

Assets, liabilities, and capital of the owner Signup and view all the answers

Why is classifying financial transactions essential in accounting?

It establishes a structure for understanding financial performance. Signup and view all the answers

What does the communication to the users of financial information focus on?

Understanding if users are satisfied with the financial statements Signup and view all the answers

Which of the following will not be recorded in the books of account?

Quarrel between managers Signup and view all the answers

Which is the last step of the accounting process?

Preparing financial statements Signup and view all the answers

Transactions are posted into ________ from journal book.

Ledger Signup and view all the answers

Which of the following is not considered an internal user of financial statements?

Banks Signup and view all the answers

What is the primary focus of financial accounting?

Meeting the needs of external users Signup and view all the answers

Which branch of accounting deals with the government's funds?

Government accounting Signup and view all the answers

What type of information does management accounting primarily provide?

Timely information for internal users Signup and view all the answers

What is a key function of cost accounting?

Determining the cost of products or services Signup and view all the answers

What is the primary purpose of maintaining accounting records?

To record financial transactions systematically Signup and view all the answers

Which of the following statements about internal users of accounting information is true?

They focus on decision-making within the organization. Signup and view all the answers

Which statement describes the role of the Balance Sheet?

It determines the financial position of the business. Signup and view all the answers

Which of the following is NOT considered an external user of accounting information?

Management Signup and view all the answers

What is the primary objective of the Profit & Loss Statement?

To summarize net results over a time period Signup and view all the answers

Which of the following is a key objective of accounting?

To provide financial information to users Signup and view all the answers

Who is primarily responsible for utilizing accounting information for management decision-making?

Management Signup and view all the answers

Which transaction qualifies as a business transaction?

Purchased office supplies for Php 5,000 Signup and view all the answers

What is the primary purpose of internal auditing?

To assess operational efficiency and management policy adherence Signup and view all the answers

Which of the following best describes external auditing?

Involves the examination of financial records by an independent CPA Signup and view all the answers

What critical function does tax accounting perform?

It helps clients comply with tax authority regulations Signup and view all the answers

What is the primary purpose of preparing general-purpose financial statements?

To provide a comprehensive overview of an organization's financial status Signup and view all the answers

What is the role of cost accounting in a manufacturing business?

To analyze and present manufacturing costs Signup and view all the answers

What is the goal of reviewing tax compliance of a business?

To ensure accuracy and adherence to tax laws Signup and view all the answers

Which branch of accounting evaluates the performance of a sales department?

Managerial Accounting Signup and view all the answers

Which service involves reviewing an entity’s accounting records for operational improvement?

Auditing Signup and view all the answers

How does cost accounting impact product pricing?

It aids in setting competitive selling prices based on costs Signup and view all the answers

Why might a company engage an external auditor?

To provide an independent opinion on financial statements Signup and view all the answers

Which of the following does tax accounting NOT typically involve?

Detailed auditing of financial records Signup and view all the answers

What is the purpose of evaluating compliance with the collection and deposit policy?

To ensure the organization follows its own internal policies Signup and view all the answers

What does internal auditing primarily assess regarding data?

The relevance and adherence to management policies Signup and view all the answers

Which accounting function checks if financial statements are presented fairly?

Internal Auditing Signup and view all the answers

Who usually reports on the spending of government funds?

Government auditors Signup and view all the answers

What information is assessed in the reporting of total production costs?

Materials and labor costs used in production Signup and view all the answers

Study Notes

Financial Transactions

Financial transactions include sales to customers, employee salaries, and equipment purchases.

Communication to Users

Users require satisfaction with the company’s financial statements to assess performance.

Recording

Record financial transactions in the General Journal to maintain a chronological account.

Classifying

Group financial transactions into categories such as expenses and income in the Ledger.

Summarizing

Organize classified transactions into financial statements:
- Profit & Loss Statement for income and expenses.
- Balance Sheet for assets, liabilities, and capital.

Illustrative Examples

General Journal captures initial raw entries of business transactions sequentially by date.
Ledger formalizes tracking of assets, liabilities, owner's capital, revenues, and expenses.

Objectives of Accounting

Maintain systematic accounting records for financial transactions.
Determine net results through Profit & Loss (Income Statement).
Assess financial position using the Balance Sheet (Position Statement).
Provide crucial financial information for management decision-making and control.

Users of Accounting Information

Internal Users: Owners, Employees, Management.
External Users: Creditors, Investors, Government, Banks.

Branches of Accounting

Financial Accounting: Serves external users with complete sets of financial statements; focuses on historical data.
Management Accounting: Offers timely information for internal decision-making; includes budgeting and cost analysis.
Government Accounting: Concerned with government fund management; tracks tax income and expenditures on public services.
Auditing: Verifies financial records' accuracy through internal and external reviews; ensures compliance with standards.
Tax Accounting: Guides clients on tax regulations, includes tax planning, preparation, and legal tax minimization strategies.
Cost Accounting: Analyzes manufacturing costs to determine pricing and operational efficiency; supports management decisions.

Understanding Questions

Financial information originates from actual transactions.
External users include creditors and investors.
Shareholders, employees, and managers are considered internal users.
Personal expenses, like family fees paid from personal accounts, are not business transactions.
Quarrels and personal disputes are not recorded in accounting.
Transactions are posted into the Ledger from the journal.
Internal users do not include creditors or suppliers.

Forms of Business Organizations

Organizations comprise people working collaboratively towards common objectives.
Business organizations specifically focus on achieving shared goals aligned with their mission and culture.

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