Financial Accounting and Reporting (FAR) Module 1
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Questions and Answers

Who is considered the father of accounting?

  • Cotrugli
  • Fr.Luca Pacioli (correct)
  • A financial analyst
  • An Italian businessman

What is the primary function of accounting?

  • To analyze financial statements
  • To prepare financial reports (correct)
  • To record business transactions
  • To make investment decisions

What is the term for an activity or event taking place in a business, expressed in terms of money?

  • Business event
  • Economic activity
  • Transaction (correct)
  • Financial statement

What is the purpose of financial statements?

<p>To communicate vital financial information (A)</p> Signup and view all the answers

What is the book where the double entry bookkeeping system could be traced?

<p>Summa de Aritmetica (C)</p> Signup and view all the answers

What is the definition of accounting?

<p>The service activity that provides financial information (A)</p> Signup and view all the answers

What is the nature of a business?

<p>An economic unit that is engaged in buying and selling of goods or services (B)</p> Signup and view all the answers

What is the role of accounting in business?

<p>To bridge the gap between the business and the parties interested in the business (C)</p> Signup and view all the answers

What is the primary purpose of posting in accounting?

<p>To transfer entries from the journal to the ledger (B)</p> Signup and view all the answers

What is the ledger in accounting?

<p>A book of final entry (C)</p> Signup and view all the answers

How do you open a ledger account?

<p>By writing the account title at the top and the account number at the right hand corner (C)</p> Signup and view all the answers

What is the correct order of filling up the columns in a ledger account?

<p>Date, Explanation, PR or JR, Debit, Credit, Balance (C)</p> Signup and view all the answers

Why do you need to indicate the journal page in the PR or JR column?

<p>To know the journal entry from which the transaction was derived (D)</p> Signup and view all the answers

What is the correct manner of posting journal entries?

<p>Posting the journal entries chronologically (D)</p> Signup and view all the answers

What is the purpose of the Explanation column in a ledger account?

<p>To write a brief explanation of the transaction (A)</p> Signup and view all the answers

Why do you need to open the ledger accounts before posting journal entries?

<p>To transfer the entries from the journal to the ledger (D)</p> Signup and view all the answers

What is the primary purpose of identifying the events to be recorded in the first step of the accounting cycle?

<p>To gather information about transactions or events from source documents (A)</p> Signup and view all the answers

What is the purpose of posting the journal entries to the accounts in the ledger?

<p>To transfer information from the journal to the ledger for classification purposes (A)</p> Signup and view all the answers

What is the purpose of preparing the trial balance?

<p>To verify or check the equality of the debits and credits in the ledger (C)</p> Signup and view all the answers

What is the end result of the accounting cycle?

<p>The preparation of the financial statements (C)</p> Signup and view all the answers

What is the purpose of the analysis of transactions in the first step of the accounting cycle?

<p>To identify the transaction from the source documents and do all of the above (D)</p> Signup and view all the answers

What is the purpose of preparing the worksheet?

<p>To aid in the preparation of the financial statements (B)</p> Signup and view all the answers

What is the sequence of steps in the accounting cycle?

<p>Identify events, record in journal, post to ledger, prepare trial balance, prepare financial statements (B)</p> Signup and view all the answers

What is the purpose of the accounting cycle?

<p>To provide financial information that will help users or decision-makers (B)</p> Signup and view all the answers

Study Notes

Introduction to Accounting

  • Fr. Luca Pacioli is considered the father of accounting and was an Italian mathematician.
  • He prepared the book "Summa de Aritmetica" in 1494, which introduced the double entry bookkeeping system.
  • Cotrugli wrote the first accounting book in Naples.

Definition and Nature of Accounting

  • Accounting is a service activity that prepares financial reports to provide relevant financial information for informed economic decisions.
  • Accounting can also be defined as the art of recording, classifying, and summarizing financial transactions and events.
  • Accounting bridges the gap between the business and interested parties.
  • Accounting is the language of business.

Transactions and Financial Statements

  • A transaction is an activity or event expressed in terms of money.
  • Financial statements communicate vital financial information about the business to stakeholders.

Business Nature and Organizations

  • A business is an economic unit engaged in buying and selling goods or services.

The Accounting Cycle

  • The accounting cycle refers to a series of sequential steps to accomplish the accounting process.
  • The steps in the accounting cycle are:
    • Identify events to be recorded
    • Record transactions in the journal
    • Post journal entries to the ledger
    • Prepare the trial balance
    • Prepare the worksheet and financial statements

Posting Process

  • Posting is the process of transferring journal entries to the ledger.
  • The ledger is the book of final entry where transactions are last recorded.
  • To open a ledger account, write the account title, account number, and column headings (Date, Explanation, PR/JR, Debit, Credit, and Balance).
  • Journal entries are posted chronologically.

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Test your knowledge of the introduction to accounting, including the history and definition of accounting, and the role of Fr. Luca Pacioli as the father of accounting.

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