Questions and Answers
What do gains represent in financial terminology?
Which statement is true regarding adjusting entries related to depreciation?
What does the conceptual framework state about Philippine Financial Reporting Standards (PFRS)?
How do losses relate to expenses within the context of financial reporting?
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Which of the following is incorrect about the definition of expenses?
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Which of the following statements about receivables is true?
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What is the relationship between revenue, income, and gains?
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What is the effect on net income if the ending inventory is understated for the current period?
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Which statement regarding cash flows is accurate?
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In a proof of cash process, what happens when an error is found regarding receipts and disbursements?
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Regarding discontinued operations, which statement is true?
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How are non-trade receivables classified for accounting purposes?
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What happens if receipts and disbursements are understated due to an error that is also corrected in the current month?
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Which of the following statements about the classification of dividend payments is correct?
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Which of the following represents a future taxable amount?
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What is the total amount of future taxable amounts identified?
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Which expense is NOT considered a future taxable amount?
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How much is reported for unearned rent income?
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What type of income is represented by prepaid advertising expense?
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Which of the following represents a non-deductible expense?
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Study Notes
Unearned Income and Expenses
- Unearned rent income: P500,000 (Future taxable amount)
- Prepaid advertising expense: P300,000 (Future taxable amount)
- Installment sale taxable upon collection: P800,000 (Future taxable amount)
- Total future taxable amounts: P1,220,000 (Sum of unearned rent income, prepaid advertising, and installment sale)
Biological Assets
- Biological assets consist of dairy cattle valued at P3,000,000, sheep at P2,000,000, and fruit trees at P1,500,000.
- Total biological assets value: P6,500,000.
Income and Expense Definitions
- Gains: Items that meet the definition of income, not arising from ordinary activities.
- Losses: Items that fit the definition of expenses, not arising from ordinary activities.
- Definition of expenses includes both losses and ordinary expenses.
- Definition of revenue includes income and gains.
Adjusting Entries and Conceptual Framework
- Adjusting entries for depreciation and bad debts are not reversed.
- The conceptual framework is not a Philippine Financial Reporting Standard (PFRS) and does not define standards for specific measurement issues.
- No aspect of the framework overrides existing PFRS.
Receivables Accounting
- Non-trade receivables classified as current assets if collectible within a year or normal operating cycle.
- If notes receivable is unpaid at maturity, accounts receivable increases by the face value, accrued interest, and other charges.
Proof of Cash and Inventory Errors
- Understatement of receipts/disbursements leads to an increase adjustment in proof of cash if corrected in the current month.
- Understated ending inventory impacts net income: understated for the current period, overstated in subsequent periods.
Reporting Financial Activities
- Dividend and interest received reported under investing activities.
- Discontinued operations, net of tax, should be reported on the face of other comprehensive income.
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Description
Test your knowledge on key accounting concepts related to unearned income, prepaid expenses, and accrued obligations. This quiz will help you understand the implications of accrual accounting and its impact on financial statements.