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Questions and Answers
What is the foundation for the accounting equation?
What is the foundation for the accounting equation?
Which type of asset has a physical form?
Which type of asset has a physical form?
Which of the following describes a liability?
Which of the following describes a liability?
What is the formula used to determine profit or loss in a business?
What is the formula used to determine profit or loss in a business?
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Which financial statement provides a summary of a company's overall performance?
Which financial statement provides a summary of a company's overall performance?
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What does the term 'allowance for bad debts' refer to?
What does the term 'allowance for bad debts' refer to?
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What is the expanded accounting equation?
What is the expanded accounting equation?
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What is classified as Owner's Withdrawal in a business?
What is classified as Owner's Withdrawal in a business?
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What type of income is recognized when there are notes receivable?
What type of income is recognized when there are notes receivable?
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Which of the following terms relates to businesses that primarily sell services?
Which of the following terms relates to businesses that primarily sell services?
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What does the term 'Cost of Sales' refer to?
What does the term 'Cost of Sales' refer to?
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Which type of expense is categorized as 'Miscellaneous Expenses'?
Which type of expense is categorized as 'Miscellaneous Expenses'?
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What is indicated by 'Bad Debts' in accounting?
What is indicated by 'Bad Debts' in accounting?
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How are 'Gains' characterized in accounting?
How are 'Gains' characterized in accounting?
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What does the term 'Freight Out' represent in accounting?
What does the term 'Freight Out' represent in accounting?
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Which of the following is included in 'Depreciation Expense'?
Which of the following is included in 'Depreciation Expense'?
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What does the debit entry in a T-account signify?
What does the debit entry in a T-account signify?
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Which group is typically involved in the formation of a corporation according to accounting principles?
Which group is typically involved in the formation of a corporation according to accounting principles?
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What distinguishes accountable events from non-accountable events in accounting?
What distinguishes accountable events from non-accountable events in accounting?
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Which type of activity does a manufacturing business primarily engage in?
Which type of activity does a manufacturing business primarily engage in?
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What is the main focus of financial accounting?
What is the main focus of financial accounting?
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Which of the following best describes qualitative accounting information?
Which of the following best describes qualitative accounting information?
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Who are the typical external users of accounting information?
Who are the typical external users of accounting information?
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What does hybrid accounting involve?
What does hybrid accounting involve?
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What was one of the earliest forms of accounting documented by archaeologists?
What was one of the earliest forms of accounting documented by archaeologists?
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What is typically the main output of the accounting communication process?
What is typically the main output of the accounting communication process?
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What significant contribution did Fra Luca Pacioli make to accounting?
What significant contribution did Fra Luca Pacioli make to accounting?
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Which financial report is primarily beneficial for internal users?
Which financial report is primarily beneficial for internal users?
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What is a key purpose of tax accounting?
What is a key purpose of tax accounting?
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In which year was Pacioli's influential book published?
In which year was Pacioli's influential book published?
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What does the auditing process primarily check for in financial statements?
What does the auditing process primarily check for in financial statements?
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What type of business structure must register with the Security and Exchange Commission (SEC)?
What type of business structure must register with the Security and Exchange Commission (SEC)?
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What is a primary focus of government accounting?
What is a primary focus of government accounting?
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What distinguishes material effects from immaterial effects in accounting?
What distinguishes material effects from immaterial effects in accounting?
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Study Notes
Fundamentals of Accounting
- Account: Basic unit for storing financial information, tracking increases and decreases in assets, liabilities, equity, income, or expenses.
- Accounting Equation: A = L + OE; represents the relationship between assets, liabilities, and owner's equity.
- Expanded Accounting Equation: A = L + OE + R/I - E; includes revenue and income while accounting for expenses.
Major Account Classifications
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Assets: Economic resources controlled, providing benefits.
- Tangible Assets: Physical form (e.g., machinery, buildings).
- Intangible Assets: Non-physical items (e.g., patents, trademarks).
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Liabilities: Current obligations from past events that require resource outflow to settle.
- Examples include accounts payable and notes payable.
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Equity: Residual interest in assets after deducting liabilities.
- Owner’s Capital: Initial investment.
- Owner’s Withdrawals: Owner's distributions from the business.
Financial Statements
- Income Statement: Details revenues, expenses, gains, and losses for a specific period, highlighting profit or loss.
- Balance Sheet: Snapshot of a company's financial position, summarizing assets, liabilities, and equity at a specific date.
Gains and Losses
- Gains: Arise from non-ordinary transactions, such as selling unexpected inventory.
- Losses: Result from unforeseen events, such as disasters or damaged goods.
Expenses Overview
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Expenses: Outflows of resources that incur costs during operations, including:
- Cost of Sales: Direct costs of products sold.
- Operating Expenses: Salaries, rent, utilities.
- Other Expenses: Advertising, taxes, and miscellaneous costs.
T-Accounts
- Debit: Reflects value received; increases assets and expenses.
- Credit: Reflects value parted with; increases liabilities and equity.
Introduction to Accounting
- Accounting Definition: Process of identifying, recording, and communicating economic information to facilitate decision-making.
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Essential Elements:
- Identifying accountable events affecting assets, liabilities, equity, income, and expenses.
- Recording these events in financial accounts.
- Communicating results through financial statements.
Types of Financial Information
- Quantitative: Numeric data.
- Qualitative: Descriptive data.
- Financial: Monetary value information.
Branches of Accounting
- Financial Accounting: General record-keeping and reporting for external users.
- Management Accounting: Focus on internal reporting and management needs.
- Cost Accounting: Analysis of production costs.
- Tax Accounting: Preparing tax returns and providing guidance on tax-related issues.
- Auditing: Independent examination of financial statements for reliability.
Forms of Business
- Sole Proprietorship: Owned and operated by one person, registered with DTI.
- Partnership: Agreement between multiple owners, registered with SEC.
- Corporation: Separate legal entity formed by law, owned by shareholders, registered with SEC.
- Cooperative: Member-owned organization, focusing on collective activities with equal decision-making.
Historical Context
- Ancient Accounting: Evidence dates back to 8500 B.C., using clay tokens.
- Modern Accounting: Double-entry bookkeeping developed in 1340 A.D. by Fra Luca Pacioli, known as the father of modern accounting. Published “Summa di Arithmetica” in 1494, establishing fundamental accounting principles.
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Description
Test your understanding of fundamental accounting concepts with this quiz! Covering major accounts and essential equations, it's perfect for students in ACCT 018 under Prof. Betanio for the academic year 2024-2025.
