Accounting Principles and Transactions

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Questions and Answers

What aspect determines when a business transaction is recognized?

Recognition issue (correct)

Valuation issue

Classification issue

Measurement issue

Which issue relates to how the components of a transaction should be categorized?

Valuation issue

Reporting issue

Recognition issue

Classification issue (correct)

What is the primary purpose of summarizing financial data?

To evaluate shareholder equity

To create financial statements (correct)

To prepare detailed transaction records

To classify business expenditures

What does the classification phase of a transaction aim to reduce?

Effects of numerous transactions Signup and view all the answers

Which of the following best describes the role of recorded data in decision-making?

It must be classified and summarized for relevance. Signup and view all the answers

What is the first step in the accounting cycle?

Identifying and analyzing transactions Signup and view all the answers

Which of the following is considered an accountable event?

An increase in cash from a customer payment Signup and view all the answers

Which document is NOT included as a common source document for journal entries?

Meeting minutes Signup and view all the answers

What is the purpose of posting in the accounting cycle?

To transfer journal entries to the ledger Signup and view all the answers

What type of events are not recorded in the books of accounts?

Non-accountable events Signup and view all the answers

What happens during the adjusting journal entries step?

Entries are made to reflect accrued items Signup and view all the answers

Which of the following steps follows the preparation of the unadjusted trial balance?

Adjusting journal entries Signup and view all the answers

During which step are financial statements prepared?

Preparation of the worksheet Signup and view all the answers

What is a distinguishing mark of the professional behavior of accountants?

Complying with relevant laws and regulations Signup and view all the answers

Which career opportunity is NOT associated with public practice in accountancy?

Financial Analyst Signup and view all the answers

What is the primary goal of external auditing?

To ensure fairness and reliability of management reports Signup and view all the answers

What does bookkeeping primarily involve?

Mechanical collection of financial data Signup and view all the answers

Which statement about the accountancy profession is correct?

All accountants must be members of a national organization Signup and view all the answers

What is NOT a branch of accounting?

Mechanical Accounting Signup and view all the answers

Which of the following roles is associated with government service in accountancy?

State Accountant Signup and view all the answers

What does cost accounting primarily focus on?

Costing products and services Signup and view all the answers

Professional accountants should avoid which of the following actions?

Disclosing sensitive information without authority Signup and view all the answers

Which career opportunity is typically NOT part of the education/academe sector in accountancy?

Audit Examiner Signup and view all the answers

What is the purpose of the General Journal?

To show all effects of a transaction in terms of debits and credits Signup and view all the answers

What process follows the identification and analysis of an accountable event?

Journalizing Signup and view all the answers

What is the primary function of the Ledger?

To classify and summarize transactions for financial statements Signup and view all the answers

Which of the following elements is NOT included in a journal entry?

Total revenue Signup and view all the answers

Which type of journal entry includes only one debit and one credit?

Simple entry Signup and view all the answers

Where are amounts entered after a journal entry is created?

In the ledger accounts Signup and view all the answers

What is the format required for a journal entry?

Date, account titles, debit, and credit columns Signup and view all the answers

In which order are accounts listed in a Trial Balance?

Assets, Liabilities, Owner's Equity, Expenses, Revenues Signup and view all the answers

What is the minimum average score a candidate must achieve in the CPA Licensure Examination (CPALE) to pass?

75% Signup and view all the answers

Which organization established the Philippine Accounting Standards Council (ASC)?

Philippine Institute of Certified Public Accountants Signup and view all the answers

What is the scope of subjects tested in the CPA Licensure Examination?

All the subjects listed under CPALE coverage Signup and view all the answers

How many members compose the new accounting standard setting body as per the Financial Reporting Standards Council (FRSC)?

15 members Signup and view all the answers

What must a candidate do if they fail two complete CPALE examinations?

Take at least 24 units of subjects given in the exam Signup and view all the answers

What is a key goal of the Core Competencies Frameworks for Accountants?

Align workplace requirements with academic preparation Signup and view all the answers

Which of the following is NOT a fundamental principle in the Code of Ethics for Professional Accountants?

Responsibility Signup and view all the answers

What is required for a professional accountant to comply with the Code of Ethics?

Being straightforward and honest in all professional matters Signup and view all the answers

Which aspect of skills is emphasized in the core competencies framework for accountants?

Interpersonal skills Signup and view all the answers

What happens to the subjects failed by a candidate in the CPALE?

They can retake only the failed subjects with a removal examination Signup and view all the answers

What is emphasized regarding the values in the core competencies framework for accountants?

Professional ethics and moral values Signup and view all the answers

Which organization provides substantial support for the Accounting Standards Council?

Central Bank of the Philippines Signup and view all the answers

How many units of study must be completed by a candidate before reattempting the CPALE after two failures?

24 units Signup and view all the answers

What does 'Continuing Duty' in Professional Competence and Due Care imply?

Ongoing professional knowledge and skill maintenance is essential Signup and view all the answers

In the Philippine Code of Ethics, which principle ensures that accountants do not allow conflicts of interest?

Objectivity Signup and view all the answers

Study Notes

Business Transaction Measurement

Critical decisions include recognizing when the transaction occurred (recognition issue), determining the transaction value (valuation issue), and classifying transaction components (classification issue).
Classification minimizes the impact of numerous transactions, organizing them into useful groups.
Summarization of financial data results in financial statements that reflect the business's activities over a specific period.

CPA Licensure Examination (CPALE) Overview

Candidates require an average score of 75% with no subject below 65% to pass.
Failing two complete CPALE disqualifies a candidate unless they complete 24 relevant units in the failed subjects.

Philippine Accounting Standards Organizations

Accounting Standards Council (ASC): Established in 1981 to enhance generally accepted accounting standards in the Philippines, supported by several key financial bodies.
Financial Reporting Standards Council (FRSC): Formed under R.A. 9298 as the new standard-setting body, composed of 15 members from diverse accounting backgrounds.

Core Competencies Framework for Accountants

Aimed at bridging workplace requirements with academic training.
Focuses on producing competent and ethical accountants capable of international competition.
Essential areas include general knowledge, specialized accounting knowledge, and strong interpersonal skills.

Code of Ethics for Professional Accountants

Professional accountants must maintain integrity, objectivity, professional competence, confidentiality, and professional behavior.
The Code emphasizes adherence to ethical standards set by the Philippine Institute of Certified Public Accountants (PICPA) and the Professional Regulation Commission (PRC).

Characteristics and Career Opportunities in Accountancy

All members must possess relevant degrees and pass a licensure exam while adhering to a strict Code of Ethics.
Career paths available in public practice, commerce and industry, government service, and education include positions like auditors, tax managers, financial analysts, and educators.

Branches of Accounting

Auditing: Focuses on the examination of financial reports for fairness and accuracy.
Bookkeeping: Involves the mechanical task of recording financial data and maintaining accurate account records.
Financial Accounting: Record keeping of business transactions and preparation of financial position reports.
Cost Accounting: Involves recording, analyzing, and reporting costs associated with production.

Accounting Cycle Steps

Step 1: Identify and analyze accountable events that affect financial statements.
Step 2: Journalize transactions chronologically, recording debits and credits.
Step 3: Post journal entries to the ledger for classification and summarization.
Step 4: Prepare the trial balance to check for accuracy.
Steps 5-9: Include worksheet adjustments, financial statement preparation, and closing entries.

Importance of the General Journal and Ledger

General Journal: The first point of entry capturing all transaction effects; shows every journal entry's debit and credit effects.
Ledger: A compilation of accounts used to classify and summarize transactions, essential for preparing basic financial statements.

Journal Entry Components

Journal entries must list the date, accounts affected (debit and credit), and an explanation.
Simple journal entries involve one debit and one credit, while compound entries include multiple debits or credits.

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Description

This quiz explores the vital concepts of recognizing business transactions, including when they occur and how to determine their value. Understanding these principles is essential for accountants to accurately measure and record financial activities. Test your knowledge of these fundamental accounting practices!