Accounting Fundamentals
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Questions and Answers

What is the function of classification in accounting?

  • To analyze and interpret financial data
  • To systematically group transactions of one nature (correct)
  • To communicate accounting information properly
  • To prepare financial statements

    • What is the purpose of summarizing in accounting?

  • To analyze and interpret financial data
  • To group transactions of one nature together
  • To prepare financial statements (correct)
  • To communicate accounting information properly

    • In accounting, what is the end-function of interpreting financial data?

  • To systematically analyze and interpret financial data (correct)
  • To prepare financial statements
  • To group transactions of one nature together
  • To communicate accounting information properly

    • How does communicating fit into the functions of accounting?

    <p>By distributing accounting reports properly</p> Signup and view all the answers

    What is Mr. Juan's main business after his retirement?

    <p>Bakery owner</p> Signup and view all the answers

    Who is in charge of both baking and sales at Mr. Juan's bakery shop?

    <p>Jose</p> Signup and view all the answers

    What is the purpose of an account title in accounting?

    <p>To identify the account and convey its purpose</p> Signup and view all the answers

    Which of the following is NOT a type of account in the Statement of Financial Position or Balance Sheet?

    <p>Income</p> Signup and view all the answers

    What is the essential characteristic of an asset?

    <p>All of the above</p> Signup and view all the answers

    Which of the following is NOT a classification of current assets?

    <p>Property, Plant, and Equipment</p> Signup and view all the answers

    What is the time period for an asset to be considered a current asset?

    <p>Within one year</p> Signup and view all the answers

    Which of the following statements about assets is correct?

    <p>Assets must provide future economic benefits</p> Signup and view all the answers

    What is the purpose of purchasing inventories in a business?

    <p>To utilize excess cash</p> Signup and view all the answers

    What does Notes Receivable represent in accounting?

    <p>Interest collectible on promissory notes</p> Signup and view all the answers

    What do Contra-Assets Accounts like Allowance for Doubtful Accounts represent?

    <p>Portion of accounts receivable estimated to be uncollectible</p> Signup and view all the answers

    What is the purpose of Advances to Employees in accounting?

    <p>To provide employees with loans payable through salary deductions</p> Signup and view all the answers

    What should NOT be included as part of a company's expenses?

    <p>Gas expenses for the owner's personal vehicle</p> Signup and view all the answers

    What do Prepaid Expenses in accounting signify?

    <p>Services paid for but not yet utilized or consumed</p> Signup and view all the answers

    What is the basic time period for preparing accounting reports?

    <p>One year</p> Signup and view all the answers

    What category does Accrued Income belong to in accounting terms?

    <p>Trade and Other Receivables</p> Signup and view all the answers

    Which of the following is NOT an example of a fiscal year?

    <p>January 1, 2019 to December 31, 2019</p> Signup and view all the answers

    What principle assumes that a business enterprise will continue to operate indefinitely?

    <p>Going Concern Principle</p> Signup and view all the answers

    According to the Monetary Unit Principle, what should a company report its financial statements in?

    <p>The currency of the country where the company is headquartered</p> Signup and view all the answers

    Which of the following is an example of a calendar year?

    <p>January 1, 2020 to December 31, 2020</p> Signup and view all the answers

    What is the second step in examining a business transaction?

    <p>Determine which accounts will be affected</p> Signup and view all the answers

    In journalizing a transaction, what does the 'Ref.' column in the general journal represent?

    <p>Reference to ledger accounts</p> Signup and view all the answers

    What does a complete journal entry consist of?

    <p>Date, accounts affected, and explanation</p> Signup and view all the answers

    In journalizing, where is the credit account title typically entered?

    <p>Indented on the next line after the debit account</p> Signup and view all the answers

    What role does a brief explanation play in a journal entry?

    <p>Provides context for why the transaction occurred</p> Signup and view all the answers

    What purpose does leaving a space between journal entries serve?

    <p>Separates individual journal entries for clarity</p> Signup and view all the answers

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