Fundamentals of Accountancy, Business and Management 2

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Questions and Answers

Which statement provides information about the financial performance of a company by computing the net income or net loss of the entity?

Statement of Comprehensive Income (correct)
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows

What is the purpose of the statement of financial position?

To provide information about the financial performance of a company
To list the total assets, liabilities, and capital of a company
To distinguish current from non-current assets and liabilities (correct)
To compute the net income or net loss of the entity

How can the statement of financial position be presented?

Using the report form
Using the statement of comprehensive income
Using two separate statements
Using the accounting form (correct)

What is the difference between the statement of comprehensive income of a service company and a merchandising company?

The computation of net sales and cost of goods sold (B) Signup and view all the answers

What are the two components of the statement of comprehensive income?

Other comprehensive income and other comprehensive loss (A) Signup and view all the answers

Which one of these is true about the statement of financial position?

It distinguishes current from non-current assets and liabilities (B) Signup and view all the answers

How is the statement of comprehensive income presented?

By separating profit and losses and other comprehensive income (C) Signup and view all the answers

What is the difference between the statement of comprehensive income of a service company and a merchandising company?

The source of income (B) Signup and view all the answers

Which one of the following correctly describes the accounting form of the statement of financial position?

Total assets are presented on the left and liabilities and capital are presented on the right. (C) Signup and view all the answers

What is the purpose of the statement of comprehensive income?

To provide information about the financial performance of the company by computing the net income or net loss. (A) Signup and view all the answers

How does the source of income differ between a service company and a merchandising company in the statement of comprehensive income?

A merchandising company's source of income primarily comes from selling products. (A) Signup and view all the answers

Which one of the following is true about the equity section of a sole proprietorship?

It is called Owners Equity (B) Signup and view all the answers

What caused the decrease in the Capital balance at the end of the year?

Net Loss (C) Signup and view all the answers

What are the three forms of business organizations based on their ownership?

Sole Proprietorship, Partnership, and Corporation (D) Signup and view all the answers

What is the purpose of the Statement of Changes in Equity?

To show the details in the movement of the equity or Capital Account (A) Signup and view all the answers

What is the difference between the equity section of a sole proprietorship and a partnership?

Owners Equity vs Partner's Equity (C) Signup and view all the answers

Which one of the following correctly describes the equity section of a partnership?

Partner's Equity (C) Signup and view all the answers

What is the purpose of the statement of changes in equity?

To provide details of the movement of the equity or capital account (A) Signup and view all the answers

What are the three forms of business organizations based on their ownership?

Sole proprietorship, partnership, and corporation (C) Signup and view all the answers

Which one of the following correctly describes the equity section of a corporation?

Shareholders' Equity (C) Signup and view all the answers

What is the purpose of the statement of changes in equity?

To explain the changes in the equity or capital account (B) Signup and view all the answers

What are the three forms of business organizations based on their ownership?

Sole proprietorship, partnership, and corporation (D) Signup and view all the answers

Which of the following activities is NOT included in operating activities in the cash flow statement?

Sale of goods (A) Signup and view all the answers

Which of the following activities is included in investing activities in the cash flow statement?

Paid cash for purchase of goods (A) Signup and view all the answers

Which of the following activities is included in financing activities in the cash flow statement?

Owner withdraws investment (C) Signup and view all the answers

What is the purpose of the cash flow statement?

To show the net change in the cash balance of a company (D) Signup and view all the answers

Which of the following is NOT a category of cash flows in the cash flow statement?

Administrative activities (B) Signup and view all the answers

Which one of the following activities is included in operating activities in the cash flow statement?

Paying rent (D) Signup and view all the answers

Which one of the following activities is included in investing activities in the cash flow statement?

Purchasing long-term assets (D) Signup and view all the answers

Which one of the following activities is included in financing activities in the cash flow statement?

Withdrawing investment (B) Signup and view all the answers

Which one of the following is NOT a category of cash flows in the cash flow statement?

Equity activities (A) Signup and view all the answers

What is the purpose of the cash flow statement?

To provide information on the inflows and outflows of the cash account (B) Signup and view all the answers

What are the three categories of cash flows in the cash flow statement?

Operating activities, investing activities, financing activities (D) Signup and view all the answers

Which one of the following is true about common-size analysis?

It computes all accounts as a percentage of total assets for the statement of financial position. (A) Signup and view all the answers

What is the purpose of horizontal analysis?

To show the percentage of change from the current year compared to the previous year. (C) Signup and view all the answers

What is the percentage of total liabilities to total assets if a firm has liabilities of ₱30,000 and owner’s capital of ₱90,000?

50 percent (B) Signup and view all the answers

What is the increase in owner’s capital from 2013 to 2014 if a firm had owner’s capital of ₱150,000 in 2013 and ₱187,500 in 2014?

12.5 percent (C) Signup and view all the answers

What is the percentage of total assets that are long-term liabilities if long-term liabilities are ₱300,000 and total assets are ₱2,100,000?

16.7 percent (A) Signup and view all the answers

Which one of the following is true about trend analysis?

It shows the percentage of change from the current year compared to the previous year. (B) Signup and view all the answers

What is the percentage of total assets that are current assets if current assets are ₱270,000 and total assets are ₱810,000?

25 percent (C) Signup and view all the answers

Comparing the amount of a balance sheet item in one year to the amount for the same item in a prior year is called ______.

horizontal analysis (C) Signup and view all the answers

Which one of the following is true about common-size analysis?

Common-size analysis compares the accounts of a company to a base account for each year. (A) Signup and view all the answers

Which one of the following is true about trend analysis?

Trend analysis compares the financial position and performance of a company for two periods. (C) Signup and view all the answers

What is the percentage of total assets that are current assets if current assets are ₱270,000 and total assets are ₱810,000?

25 percent (A) Signup and view all the answers

Which ratio measures a company's ability to cover the interest expense on its liability with its operating income?

Interest coverage ratio (A) Signup and view all the answers

Which ratio measures the company's ability to pay debts that are coming due (short-term debt)?

Current ratio (A) Signup and view all the answers

Which ratio indicates the percentage of the company's assets that are financed by debt?

Debt ratio (A) Signup and view all the answers

Which ratio indicates the percentage of the company's assets that are financed by capital?

Equity ratio (B) Signup and view all the answers

Which ratio indicates the company's reliance on debt or liability as a source of financing relative to equity?

Debt ratio (A) Signup and view all the answers

Which ratio measures the company's ability to cover the interest expense on its liability with its operating income?

Interest coverage ratio (B) Signup and view all the answers

What is the formula for calculating the percentage change in a financial statement item using horizontal analysis?

(Balance of Current Year - Balance of Prior Year) / (Balance of Prior Year) (B) Signup and view all the answers

What is the base amount for vertical analysis of the statement of financial position?

Total assets (B) Signup and view all the answers

Which ratio measures the company's ability to pay its long-term liabilities?

Debt to equity ratio (A) Signup and view all the answers

Which ratio is used to evaluate the company’s liquidity?

Current ratio (C) Signup and view all the answers

What is the formula to calculate the percentage change in a financial statement item for horizontal analysis?

Percentage change = (Balance of Current Year - Balance of Prior Year) / (Balance of Prior Year) (B) Signup and view all the answers

Which of the following is NOT a normal balance for an asset account?

Credit (C) Signup and view all the answers

What is the normal balance for a liability account?

Credit (B) Signup and view all the answers

What is the normal balance for the owner's capital account?

Credit (B) Signup and view all the answers

What is the normal balance for an income account?

Credit (A) Signup and view all the answers

What is the normal balance for an expense account?

Debit (D) Signup and view all the answers

Which of the following is NOT a normal balance for an expense account?

Credit (B) Signup and view all the answers

Which of the following is a compound journal entry?

A journal entry that requires three or more accounts (A) Signup and view all the answers

Under the periodic inventory system, how is the cost of goods sold calculated?

Beginning inventory plus net purchases (A) Signup and view all the answers

Which of the following is NOT a contra asset account?

Accumulated Depreciation - Store Equipment (B) Signup and view all the answers

What is the normal balance for the Owners, Capital account in a partnership?

Credit (C) Signup and view all the answers

Which of the following is true about the perpetual inventory system?

It continuously monitors the movement of inventory (C) Signup and view all the answers

Flashcards

Statement of Comprehensive Income

Shows a company's net income or loss over a period.

Statement of Financial Position

Presents current vs non-current assets and liabilities.