FABM 1 - Business Transactions and Analysis
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Questions and Answers

Which activities are considered financial transactions?

  • Receipt of cash from a client as advance (correct)
  • Termination of an employee
  • Acquisition of goods on credit (correct)
  • Hiring new staff members

    • What must be true for a transaction to be recorded in accounting?

  • It must involve a physical exchange of goods.
  • It should not have any financial impact.
  • It should involve at least two parties.
  • It must have a measurable amount. (correct)

    • What is the first step in the accounting cycle?

  • Preparation of a trial balance
  • Transactions and/or events (correct)
  • Posting
  • Journalizing

    • Which of the following statements is true regarding business transactions?

    <p>They must have a financial impact and be measurable. (D)</p> Signup and view all the answers

    Which document is essential for analyzing business transactions?

    <p>Business documents (C)</p> Signup and view all the answers

    What is an example of a non-financial transaction?

    <p>Hiring and termination of employees (B)</p> Signup and view all the answers

    Which of the following is not a rule of debits and credits?

    <p>Credits decrease liabilities. (D)</p> Signup and view all the answers

    What is the primary purpose of journalizing in the accounting cycle?

    <p>To record transactions in a chronological order (C)</p> Signup and view all the answers

    What is the amount Pedro invested in his computer repair business?

    <p>PHP200,000 (C)</p> Signup and view all the answers

    Which of the following correctly reflects the rules for recording debits and credits?

    <p>The total amount of debits must equal the total amount of credits. (D)</p> Signup and view all the answers

    What entry should be made for Pedro hiring Juana Magaling as a secretary?

    <p>No entry (B)</p> Signup and view all the answers

    When recording a journal entry, what is the format for writing the debited account?

    <p>Listed first and on the left side of the register (B)</p> Signup and view all the answers

    What amount did Pedro collect for repairing Jean's computer?

    <p>PHP10,000 (C)</p> Signup and view all the answers

    What should be the correct journal entry for Pedro depositing his investment?

    <p>Debit Cash PHP200,000; Credit Capital PHP200,000 (D)</p> Signup and view all the answers

    What is meant by the term 'books of original entry' in accounting?

    <p>Records that include journal and specialized journals (A)</p> Signup and view all the answers

    Which account would you use to record actual cash transactions?

    <p>Cash (D)</p> Signup and view all the answers

    What is the account code for accounts payable?

    <p>2000 (D)</p> Signup and view all the answers

    When would you use the account 'Prepaid Expenses'?

    <p>For expenses paid in advance (D)</p> Signup and view all the answers

    Which of the following accounts falls under owner's equity?

    <p>Owner's Capital (A)</p> Signup and view all the answers

    For which type of expense would you record under 'Salaries Expense'?

    <p>Salaries incurred, regardless of payment (B)</p> Signup and view all the answers

    What would the account code for Inventory typically be assigned?

    <p>1200 (D)</p> Signup and view all the answers

    Which account would you use for items that will be sold in the future?

    <p>Inventory (C)</p> Signup and view all the answers

    What purpose does the account 'Service Revenue' serve?

    <p>To document earnings from services provided (B)</p> Signup and view all the answers

    What is the correct journal entry to record the salary payment of Juana on February 25, 2016?

    <p>Debit Salary Expense PHP4,000; Credit Cash PHP4,000 (D)</p> Signup and view all the answers

    Which entry corresponds to Pedro's purchase of office supplies on February 19, 2016?

    <p>Debit Office Supplies PHP5,000; Credit Accounts Payable PHP5,000 (C)</p> Signup and view all the answers

    When Maria invested PHP60,000 to start her barbershop on January 18, 2016, what was the journal entry?

    <p>Debit Cash PHP60,000; Credit Capital PHP60,000 (B)</p> Signup and view all the answers

    What is the correct journal entry for the payment of PHP10,000 rental for January 2016?

    <p>Debit Rental Expense PHP10,000; Credit Cash PHP10,000 (D)</p> Signup and view all the answers

    How should the journal entry for collections from Malakas Company on January 17, 2016, be recorded?

    <p>Debit Cash PHP20,000; Credit Accounts Receivable PHP20,000 (B)</p> Signup and view all the answers

    What journal entry reflects the withdrawal of PHP30,000 by Peter Pawn for his son’s tuition?

    <p>Debit Withdrawals PHP30,000; Credit Cash PHP30,000 (D)</p> Signup and view all the answers

    In preparing a chart of accounts, which step is involved?

    <p>Define the account numbers and categories (A)</p> Signup and view all the answers

    What entry corresponds to the purchase of office equipment with a 40% down payment?

    <p>Debit Office Equipment PHP20,000; Credit Cash PHP8,000; Credit Accounts Payable PHP12,000 (C)</p> Signup and view all the answers

    What information should be placed in the reference column of the ledger?

    <p>The page number of the journal (C)</p> Signup and view all the answers

    What is the first step in posting from the journal to the ledger?

    <p>Transferring amounts to the debit and credit sides (B)</p> Signup and view all the answers

    What purpose does inserting the account number in the journal serve?

    <p>It indicates that posting is completed (A)</p> Signup and view all the answers

    What should be noted on the credit side of the ledger?

    <p>Credit accounts from the journal (D)</p> Signup and view all the answers

    Which step outlines placing the account number in the journal's reference column?

    <p>Step 3 (D)</p> Signup and view all the answers

    What is specified about the general ledger in the context given?

    <p>It requires a three-column format (C)</p> Signup and view all the answers

    What action is related to the completion of posting in the journal?

    <p>Writing the account number in the reference column (C)</p> Signup and view all the answers

    What are debits posted on in the ledger?

    <p>The left side (B)</p> Signup and view all the answers

    Study Notes

    FABM 1 - Business Transactions and Analysis

    • Course focuses on business transactions in a service business
    • Instructor: Noel Garcia Tubice
    • Covered topics include business transactions, their analysis, and application to the accounting cycle for a service business.

    Course Content

    • Content Standards: Define and examine business transactions, types of transactions, and debits/credits. Includes business documents and their rules (e.g. debits and credits)
    • Performance Standards: Ability to identify business and non-business transactions, enumerate types of business documents, explain the rules of debit and credit, apply these rules to simple cases
    • Learning Competencies: Develop the ability to describe and give examples of business transactions. Learn to identify various business documents and analyze business transactions using debit and credit rules.
    • Codes: Identifies the code for each learning competency (ABM_FABM 11-IIIg-j-25, ABM_FABM 11-IIIg-j-26, ABM_FABM 11-IIIg-j-27)

    Accounting Cycle

    • A continuous process for accumulating, summarizing, and reporting financial information
    • Steps involved: Transactions, Journal Entries, Posting, Trial Balance, Worksheet, Adjusting Journal Entries, Financial Statements, Closing the Books

    Step 1: Transactions and/or Events

    • Identify external and internal transactions
    • Analyze whether transactions have a financial impact
    • Financial transactions change asset, liability, or equity value
    • Examples of financial transactions : -Receiving cash from a client in advance -Paying for electrical bills
    • Examples of non-financial transactions : -Hiring or terminating employees -Government recognition -Business closing or death of owner

    Step 2: Preparation of Journal Entries (Journalization)

    • Transactions recorded using specialized journals
    • Debits (DR) and credits (CR) used to record transactions
    • Rules on Debits and Credits: -Debit account name listed first -Debit amount on left side of the register -Credit account name on the second line, indented -Credit amount on right side of the register -Total debit should equal total credit

    Step 2: Example Transactions (Matapang Computer Repairs)

    • Specific journal entries for various business transactions provided (Feb 14, 2016, Feb 15, 2016, Feb 16, 2016, etc.)

    Step 3: Posting to the Ledger

    • Copying transaction summaries from journals to ledgers (general and subsidiary ledgers)
    • Ledgers maintain running balances
    • Essential for financial tracking
    • Procedure: Determine the correct account, transfer essential information (date, explanation, amounts), place page number of a journal, and place corresponding account number in a journal

    Step 3: Chart of Accounts

    • A listing of accounts used in financial record-keeping
    • Provides foundation for financial statements
    • Steps for creating a chart of accounts: Create three columns- List all assets, liabilities, owner's equity, income and expenses in the first column- Choose an account code, and describe the account's purpose in the third column

    Step 3: Example Chart of Accounts

    • Example chart of accounts with codes (for assets, liabilities) and brief descriptions are provided

    Step 4: Unadjusted Trial Balance

    • Summarizing balances at the end of an accounting period
    • Data transfer from ledgers to worksheet
    • Accounts organized by asset, liability, owner's equity, income, and expenses
    • Presented in the example provided (Matapang Computer Repair's Unadjusted Trial Balance for February 29, 2016).

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    Related Documents

    FABM 1 Business Transactions PDF

    Description

    This quiz focuses on the analysis of business transactions in a service business context. Learners will explore types of transactions, business documents, and how debits and credits affect the accounting cycle. Get ready to apply your knowledge of business transactions and their rules effectively!

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