Fundamentals of Accountancy: Major Accounts

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Questions and Answers

Which of the following represents a long-term liability?

Bonds Payable (correct)

Accrued Expenses

Unearned Revenue

Accounts Payable

What is the effect of a Partner’s Withdrawal on equity?

Transfers to retained earnings

Does not affect equity

Decreases equity (correct)

Increases equity

Which account measures the earnings retained by a corporation?

Retained Earnings (correct)

Ordinary Share

Dividends

Share Premium

Which of the following is categorized as non-operating revenue?

Interest Income (C) Signup and view all the answers

What characterizes a contra account?

Has a balance opposite to its normal accounts (D) Signup and view all the answers

Which statement about Operating Revenues is correct?

They are generated from the company's main business activities. (A) Signup and view all the answers

How is Share Premium classified in a corporation's equity?

It is excess over par-value contributed by shareholders. (C) Signup and view all the answers

What is the typical payment term for Accounts Payable?

Payments are typically made within 30 days. (B) Signup and view all the answers

What type of revenue is derived from investments in debt securities or receivables?

Interest Revenue (C) Signup and view all the answers

Which of the following is classified as a non-operating expense?

Interest Expense (A) Signup and view all the answers

What is included under Operating Expenses?

Depreciation Expense (B) Signup and view all the answers

Which account would reflect the cost of products sold by the company?

Cost of Goods Sold (B) Signup and view all the answers

In preparing a chart of accounts, which item is listed first?

Assets (B) Signup and view all the answers

What is typically the third column in a chart of accounts used for?

Description of use (A) Signup and view all the answers

Which of the following expenses relates to the purchase of supplies used within the office?

Office Supplies Expense (B) Signup and view all the answers

What is the primary purpose of having a chart of accounts in a company?

To identify the flow of money in and out of the company (C) Signup and view all the answers

Which of the following best defines current assets?

Assets expected to be converted into cash or sold within a year (B) Signup and view all the answers

What is the primary focus of accounts receivable?

Money owed to the company by customers for credit sales (A) Signup and view all the answers

Which of the following accounts would be categorized under non-current assets?

Machinery used in production (C) Signup and view all the answers

Which statement accurately characterizes notes receivable?

They are formal promises to receive cash at a later date (B) Signup and view all the answers

What does the term 'fixed assets' refer to?

Long-term resources that provide benefits over several years (A) Signup and view all the answers

Which of these is NOT considered a type of inventory?

Cash equivalents (D) Signup and view all the answers

What distinguishes intangible assets from tangible assets?

Intangible assets do not have physical substance (D) Signup and view all the answers

Which of the following best describes prepayments?

Advance payments for future goods or services (B) Signup and view all the answers

Study Notes

Fundamentals of Accountancy, Business, and Management 1

Course offered by Mrs. Krysthel Joy A. Sarmiento at Tanauan City IHS Senior High School
The course covers the fundamentals of accountancy, business, and management.

The Five Major Accounts

Assets
- (Debit balance)
- Current Assets
  - All assets expected to be realized within the ordinary course of business or a span of 12 months, whichever is longer
  - Includes cash, accounts receivable, inventory, short-term investments, prepaid expenses, and others
- Non-current assets
  - Include equipment, machinery, vehicles, and buildings.
  - Have a useful life of more than one year.
  - Including fixed assets and intangible assets like goodwill, stock investments, patents, and websites.
Liabilities
- (Credit balance)
- Current Liabilities
  - Purchase of inventory on credit, due within 30 days.
  - Accrued expenses (e.g., salaries, utilities)
- Non-current liabilities
  - Bonds payable (Formal long term debt).
  - Notes payable (Long-term loan).
  - Unearned revenue (money received for future goods/services)
Equity
- (Credit balance)
- Capital (Initial investment made by owners).
- Withdrawal (Reduce equity, debit balance).
- Revenues (Money received for goods/services.)
- Expenses (Costs incurred for revenue.)
Contra accounts
- Accounts with an opposing balance to normal accounts within their category.
- Reduce accounts showing on the balance sheet.
Income/Revenue
- (Credit balance)
- Recognized when incurred.
- Generated from the company's main operations.
  - Including sales revenue, service revenue, and interest revenue
- Non-operating revenues come from outside normal operations.
Expenses
- (Debit balance)
- Costs to generate revenues.
- Operating expenses pertain to generating operating revenues.
  - Cost of goods sold
  - Utilities expenses
  - Office supplies expenses
  - Depreciation
  - Insurance expense
  - Salaries expense
  - Bad debt expense
  - Interest expense
Chart of Accounts
- Listing of all accounts used in business operations.
- Foundation for financial statements.
- Shows money flow.
Steps to prepare chart of accounts
- Create columns (company discretion).
- Follow accounting equation (Assets = Liabilities + Capital).
- Order: Assets, Liabilities, Capital, Revenue, Expenses
- List all accounts in the first column.
- Assign account codes (company specific).
- Provide a description for each account.

References

Investopedia article on accounting history
Fundamentals of Accountancy, Business, and Management 1 by De Guzman, A. A., DBA, CPA. Lori Mar Publishing

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Description

Test your knowledge on the fundamentals of accountancy with a focus on the five major accounts: assets and liabilities. This quiz, part of Mrs. Sarmiento's course at Tanauan City IHS, covers essential concepts needed for effective business and management practices. Dive in to see how well you understand these critical financial components.