58 Questions
A transaction that causes an increase in asset may also cause
An increase in liability
A partnership is not a separate legal entity from the partners themselves
False
The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called:
Statement of Financial Performance
Partners are personally liable for any debts incurred by the partnership.
True
The Maxim Company acquired a building for P500,000. Maxim had the building appraised, and found that the building was easily worth P575,000. The seller had paid P300,000 for the building 6 years ago. Which accounting principle would require Maxim to record the building on its records at P500,000?
Cost principle/Historical Principle
The following data were taken from the records of Arizona Corporation for the year ending December 31, 2022:
01/01/22 12/31/22
Assets 11,250 ? Liabilities 8,580 10,365 Equity ? 6.465
2,670
If equity is 300,000 and liabilities are 192,000, then assets equal:
492,000
The idea that the activities of the entity are separate from those of the individual owner is the
Entity Concept
The basic accounting equation is
Assets = Liability + Equity
The accounting assumption that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:
Business entity assumption
A sole proprietorship is a type of business organization owned by its stockholders
False
Financial statements for the partnership is by law must be produced and made public
True
Increases in equity from a company's earning activities are:
Revenues
What is the primary purpose of accounting?
Record-keeping and financial reporting
The idea that transactions are recorded at their exchange prices at the transaction date is referred to as the
Objectivity
To include personal assets and transactions of a business owner in the records and reports of the business would be in conflict with the:
Business entity assumption
Which of the following is NOT one of the four primary financial statements?
Statement of Retained Earnings
Under this principle, the effects of transactions and other events are recognized when they occur and they are recorded in the accountings records statements of the periods to which they relate
Accrual basis
The accounting concept that requires financial statement information to be supported by independent, unbiased evidence other than someone's belief or opinion is:
Objectivity
These are attributes that make the information provided in the financial statements useful to users
Qualitative characteristics
Which of the following is not a form of business organization?
Entrepreneurship
The rules that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that will not continue, is the:
Going concern assumption
Economic resource that are owned or controlled by an enterprise are called
Assets
On June 30 of the current year, the assets and liabilities of Hana Beshie, Inc. are as follows: Cash P250,00; Accounts Receivable P7,250; Supplies P650; Equipment P12,000; Accounts Payable P9,300. What is the amount of owner's equity as of July 1 of the current year?
31,100
The partners' individual exposure to debt is limited.
False
What is the primary purpose of accounting?
Record-keeping and financial reporting
In a sole proprietorship, who owns and manages the business?
Single individual
What is the main advantage of a partnership over a sole proprietorship?
Tax advantages
Which accounting principle requires expenses to be recorded in the period they are incurred, regardless of when the cash is paid?
Expense recognition principle
Which financial statement reports the financial position of a business at a specific point in time?
Balance sheet
Which of the following is a current liability?
Notes payable
What is the purpose of the income statement?
To show profitability over time
Which accounting principle dictates that revenue should be recognized when it is earned, regardless of when the cash is received?
Revenue recognition principle
What is the purpose of the statement of cash flows?
To disclose information about the cash receipts and cash payments of a business
Which financial statement is also known as the statement of changes in equity?
Retained earnings statement
What is the purpose of the double-entry accounting system?
To ensure that the accounting equation is always in balance
Which of the following is a long term liability
Mortgage payable
What is the main purpose of the statement of retained earnings?
To report changes in equity over a specific period
What is the accounting principle that requires a company to use the same accounting methods and procedures from period to period?
Consistency principle
Which financial statement is prepared first during the accounting cycle
Income statement
What is the purpose of adjusting entries in accounting?
To update the accounts to reflect the accrual basis of accounting
which of the following is an example a contra-asset account?
accumulated depreciation
what is the purpose of the trial balance in accounting?
To check the accuracy of the accounting records
The primary purpose of accounting is to provide information for marketing analysis
False
A sole proprietorship is a form of business organization with multiple owners
False
In a partnership, each partner has limited liability for the business debts
False
The matching principle requires revenues to be recorded when they are earned, not when the cash is received
True
The accounting equation is Assets = Liabilities - Equity
False
The income statement reports the financial position of a business at a specific point in time
False
Notes payable is an example of a current liability
False
The purpose of the statement of cashflows is to show changes in equity over a specific period
False
The revenue recognition principle dictates that revenue should be recognized only when cash is received
False
The double-entry accounting system ensures that the accounting equation is always out of balance
False
Accrued expenses are long-term liabilities
False
The statement of retained earnings shows the financial position of a business at a specific point in time
False
Adjusting entries are made to reconcile bank statements
False
Accumulated depreciation is an example of a contra-asset account
True
The trial balance is prepared to calculate taxes owed
False
Study Notes
Business Organization
- A partnership is not a separate legal entity from the partners themselves.
- Partners are personally liable for any debts incurred by the partnership.
- A sole proprietorship is a type of business organization owned by one person.
Accounting Principles
- The accounting principle that requires a company to record an asset at its original purchase price is the cost principle.
- The principle that requires every business to be accounted for separately from other business entities, including its owner or owners, is the entity principle.
- The principle that transactions are recorded at their exchange prices at the transaction date is referred to as the cost principle.
- The principle that requires financial statement information to be supported by independent, unbiased evidence is the evidence principle.
- The principle that requires expenses to be recorded in the period they are incurred, regardless of when the cash is paid, is the matching principle.
- The principle that dictates that revenue should be recognized when it is earned, regardless of when the cash is received, is the revenue recognition principle.
- The principle that requires a company to use the same accounting methods and procedures from period to period is the consistency principle.
Financial Statements
- The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is the income statement.
- The financial statement that reports the financial position of a business at a specific point in time is the balance sheet.
- The statement of cash flows shows the inflows and outflows of cash over a specific period.
- The statement of retained earnings shows the changes in equity over a specific period.
Accounting Equation
- The basic accounting equation is Assets = Liabilities + Equity.
- Assets are economic resources that are owned or controlled by an enterprise.
- Liabilities are debts or obligations that a business must pay.
Accounting Concepts
- The primary purpose of accounting is to provide financial information to users.
- The idea that the activities of the entity are separate from those of the individual owner is the entity concept.
- The idea that transactions are recorded at their exchange prices at the transaction date is referred to as the cost concept.
- The accounting concept that requires financial statement information to be supported by independent, unbiased evidence is the evidence concept.
Accounting Procedures
- Adjusting entries are made to update the accounts at the end of an accounting period.
- The trial balance is prepared to ensure that debits equal credits.
- The purpose of the double-entry accounting system is to ensure that the accounting equation is always in balance.
Test your knowledge about accounting transactions that result in an increase in assets and their corresponding effects on other elements of the balance sheet.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
