Business Ownership Structures and History
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Questions and Answers

What is a primary responsibility of the owner in a sole proprietorship?

  • To receive regular wages from the business
  • To share profits equally with partners
  • To absorb all losses incurred by the business (correct)
  • To manage the firm with a board of directors

    • What document must be filed with the SEC to establish a partnership?

  • Partnership Agreement
  • Articles of Partnership
  • Articles of Co-Partnership (correct)
  • Articles of Incorporation

    • How many directors are mandated to be on a Board of Directors in a corporation?

  • Not less than five and not more than 15 (correct)
  • Exactly seven directors
  • At least three and no more than ten
  • A minimum of ten directors

    • Who is responsible for managing a corporation?

    <p>The Board of Directors appointed by the shareholders</p> Signup and view all the answers

    What distinguishes cooperatives from corporations?

    <p>Members are entitled to only one voting right</p> Signup and view all the answers

    What is the purpose of the Articles of Incorporation in establishing a corporation?

    <p>To initiate the incorporation process with the SEC</p> Signup and view all the answers

    What is the legal status of the owner concerning business debts in a sole proprietorship?

    <p>The owner is personally liable for all business debts</p> Signup and view all the answers

    What legislation was enacted in 2008 to support Micro, Small and Medium Enterprises (MSMEs)?

    <p>Republic Act 9501</p> Signup and view all the answers

    What is the primary focus of Financial Accounting?

    <p>Reporting on financial position and results of operations</p> Signup and view all the answers

    Which area primarily deals with the examination of financial statements by an independent auditor?

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

    What is the main objective of Management Accounting?

    <p>Incorporating cost accounting data for management decisions</p> Signup and view all the answers

    Which of the following is NOT a requirement for a CPA in accounting education according to CHED Memo 27 s. 2017?

    <p>Specialized knowledge in marketing</p> Signup and view all the answers

    What aspect of Government Accounting is primarily concerned with?

    <p>Identifying sources and uses of resources consistent with laws</p> Signup and view all the answers

    Which service involves assessing both historical and projected data to aid management?

    <p>Management Services</p> Signup and view all the answers

    What is a key function of Financial Management?

    <p>Obtaining funds to achieve financial plans</p> Signup and view all the answers

    Who are considered internal users of financial information?

    <p>Owners and managers of the firm</p> Signup and view all the answers

    What achievement did the International Accounting Standards Board (IASB) accomplish in 2001?

    <p>Succeeded the IASC and adopted its standards.</p> Signup and view all the answers

    Which year did the European Union require all listed companies to adopt IFRS?

    <p>2005</p> Signup and view all the answers

    What was established in the Philippines in 2004 to assist the Board of Accountancy?

    <p>Financial Reporting Standards Council (FRSC)</p> Signup and view all the answers

    What does the Philippine Accountancy Act of 2004, or Republic Act No. 9298, primarily regulate?

    <p>The practice of accountancy in the Philippines</p> Signup and view all the answers

    What technological advancement has significantly affected accounting practices since 2005?

    <p>Advances in information technology and computerized systems</p> Signup and view all the answers

    How has the globalization of trade and services impacted accountants in the Philippines?

    <p>Allowed Philippine accountants to practice in foreign countries</p> Signup and view all the answers

    What was the primary purpose of the Financial Reporting Standards Council (FRSC) in the Philippines?

    <p>To assist the Board of Accountancy with its functions</p> Signup and view all the answers

    Which of the following statements about the transition to IFRS in the Philippines is true?

    <p>The country became fully compliant with IFRS in 2005.</p> Signup and view all the answers

    What was a key reason for the importance of accounting in the 1920s?

    <p>To reduce fraud and scandals in business.</p> Signup and view all the answers

    What significant change occurred to the Accountancy Law in the Philippines in 1967?

    <p>It was revised and standardized accounting education.</p> Signup and view all the answers

    What was established by the International Accounting Standards Committee (IASC) in 1973?

    <p>A uniform set of accounting principles for reporting.</p> Signup and view all the answers

    Which organization in the Philippines established the Accounting Standards Council in 1981?

    <p>The Philippine Institute of Certified Public Accountants (PICPA).</p> Signup and view all the answers

    What was the primary focus of the Accountancy Law enacted in 1923 in the Philippines?

    <p>To provide legal framework for accountancy practices.</p> Signup and view all the answers

    What was a major aspect of the transition to International Accounting Standards (AIS) in the Philippines starting in 1997?

    <p>Shifting from local accounting standards to international ones.</p> Signup and view all the answers

    Which of the following countries was not part of the agreement that created the IASC in 1973?

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

    What does the Accountancy Law passed under Presidential Decree No. 692 in 1975 relate to?

    <p>Revising prior accountancy legislation.</p> Signup and view all the answers

    What is an interim financial report?

    <p>A report prepared for periods less than one year.</p> Signup and view all the answers

    Which concept emphasizes that the Philippine peso should be used as a unit of measure in accounting?

    <p>Stable Monetary Unit Concept</p> Signup and view all the answers

    What is the main purpose of Generally Accepted Accounting Principles (GAAP)?

    <p>To make financial statements meaningful and useful to businesses.</p> Signup and view all the answers

    Which of the following criteria affect the acceptance of an accounting principle under GAAP?

    <p>Relevance, objectivity, and feasibility.</p> Signup and view all the answers

    How does the Objectivity Principle contribute to financial reporting?

    <p>By ensuring information is free from personal bias.</p> Signup and view all the answers

    What does the fiscal year refer to in accounting?

    <p>Any twelve-month period chosen by a business for reporting.</p> Signup and view all the answers

    Why is information that cannot be expressed in monetary figures considered irrelevant in accounting?

    <p>It cannot be quantified for reporting purposes.</p> Signup and view all the answers

    Which characteristic ensures that the resulting financial information is not unduly complex or costly to implement?

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

    Study Notes

    Business Ownership Structures

    • Sole Proprietorship: Owner retains all profits and is fully liable for losses and debts; business is legally inseparable from the owner.
    • Owners cannot receive salaries; withdrawals can be made from the business instead.
    • Partnership: Comprises two or more partners who contribute to a common fund with profit-sharing intentions. Governed by Articles of Co-Partnership, filed with SEC.
    • Corporation: A legal entity distinct from owners (shareholders) who elect a Board of Directors for management. Articles of Incorporation filed with SEC to establish.
    • Corporate governance mandates a minimum of five and a maximum of fifteen directors.
    • Cooperative: Voluntary association of individuals to address common needs, regulated by the Cooperative Development Authority. Distinct from corporations by one-member-one-vote principle.

    Historical Accounting Milestones

    • 2008: Republic Act 9501 established the Magna Carta for MSMEs.
    • 1920s: Rise of accounting importance to mitigate business fraud, especially in the USA.
    • 1923: Enactment of the first Accountancy Law in the Philippines (Republic Act No. 1305).
    • 1967: Revision of Philippine Accountancy Law (Republic Act No. 5166) standardized accounting education and CPA registration.
    • 1973: Formation of the International Accounting Standards Committee (IASC) aimed at global accounting standard uniformity.
    • 2001: IASC replaced by International Accounting Standards Board (IASB). Standards now termed International Financial Reporting Standards (IFRS).
    • 2005: EU mandated adoption of IFRS for listed companies starting in 2005.
    • 2004: Establishment of Financial Reporting Standards Council in the Philippines, replacing ASC, to support regulatory framework under Republic Act No. 9298.

    Evolution of Accounting Practices

    • 2005 onwards: The Philippines achieved full IFRS compliance.
    • Advances in information technology transformed manual accounting to automated processes providing increased speed, consistency, and reliability.
    • Globalization allows accountants to practice in diverse international contexts.

    Professional Accountant Qualifications

    • CPA education requires qualifications in education, experience, teaching abilities, computer literacy, and research proficiency.
    • Accountants can expand into entrepreneurship, personnel administration, insurance, and marketing.

    Specialized Accounting Services

    • Financial Accounting: Focuses on transaction recording and periodic financial position reporting.
    • Auditing: Involves independent assessments of financial statements for fairness and compliance with accepted principles.
    • Government Accounting: Manages resource accounting in line with municipal, provincial, or national laws.
    • Management Services: Utilizes historical and projected data for management decision-making.
    • Tax Accounting: Concerns the preparation of tax returns and assessing tax impacts of transactions.
    • Financial Management: Involves setting financial goals, planning, and safeguarding financial resources.
    • Management Accounting: Utilizes cost data for management decisions.

    Users of Financial Information

    • Internal users (owners/managers) manage business resources while external users analyze for investment or assessment purposes.
    • Accounting Periods: Typically span one year for reporting (calendar or fiscal). Interim reports provide timely insights.

    Key Accounting Concepts

    • Stable Monetary Unit Concept: Philippine peso as the stable measurement unit; only quantifiable transactions are recorded.
    • Generally Accepted Accounting Principles (GAAP): Provide a framework for meaningful financial statements; founded on relevance, objectivity, and feasibility.
    • GAAP evolve in response to changing business practices and environments, ensuring continual adaptation and relevance.

    Basic Accounting Principles

    • Strict adherence to GAAP is critical for reliable financial reporting.
    • Objectivity Principle: Ensures financial information is unbiased and accurately reflects organizational performance.

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    Description

    Explore the various structures of business ownership, including sole proprietorships, partnerships, corporations, and cooperatives. This quiz also covers important historical accounting milestones that shaped the business landscape. Test your knowledge of legal entities and their governance.

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