Basic Accounting

How would the accounting equation of Boston Company be affected by the billing of a client for P10,000 of consulting work completed?

+P10,000 accounts receivable, +P10,000 revenue.

The statement of cash flows reports

-Cash flows from financing activities. -The net increase or decrease in cash for the period reported. -Cash flows from investing activities.

Use the following information as at December 31 to determine equity. Liabilities.......................... Cash.................................. Equipment......................... Buildings........................... P141,000 57,000 206,000 175,000

297,000

On June 30 of the current year, the assets and liabilities of Phoenix, Inc. are as follows: Cash P20,500; Accounts Receivable, P7,250; Supplies, P650; Equipment, P12,000; Accounts Payable, P9,300. What is the amount of owner's equity as at July 1 of the current year?

31,100

The assets of a company total P700,000; the liabilities, P200,000. What are the claims of the owners?

500,000

If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000, the land account transaction amount to handle the sale of the land in the seller's books is:

85,000 increase

An awareness of the normal balances of accounts would help to locate which of the following as an error in recording?

A credit balance in an expense account

The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:

Accounting equation.

Assets created by selling goods and services on credit are:

Accounts receivable

incurred but not yet paid or recorded.

Accrued expenses are

Every time a financial statement will be prepared

Adjusting entries are required

A post-closing trial balance should be prepared

After closing entries are posted to the ledger accounts.

Which of the following establishments is business operation considered providing service?

Ahead tutorials

If a resource has been consumed but the invoice has not yet been received so the account is unpaid at the end of the accounting period, then Correct!

An adjusting entry should be made to recognised the expense

An exchange of value between two entities is called:

An external transaction

A debit may signify

An increase in an asset account

If a parcel of land that was originally purchased for P85,000 is offered for sale at P150,000, is assessed for tax purposes at P95,000, is recognized by its purchasers as easily being worth P140,000, and is sold for P137,000. At the time of the sale, assume that the seller still owed P30,000 to TrustOne Bank on the land that was purchased for P85,000. Immediately after the sale, the seller paid off the loan to TrustOne Bank. What is the effect of the sale and the payoff of the loan on the accounting equation?

Assets increase P22,000; owner's equity increases P52,000; liabilities decrease P30,000

If a parcel of land that was originally purchased for P85,000 is offered for sale at P150,000, is assessed for tax purposes at P95,000, is recognized by its purchasers as easily being worth P140,000, and is sold for P137,000. What is the effect of the sale on the accounting equation for the seller?

Assets increase P52,000; owner's equity increases P52,000.

If the liabilities of a company increased P74,000 during a period of time and equity in the company decreased P19,000 during the same period, what was the effect on the assets?

Assets would have increased P55,000.

Photometer Company paid off P30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

Assets, P30,000 decrease; liabilities, P30,000 decrease; equity, no effect

Liabilities at the end of the year are understated.

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true?

The accounting assumption that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

Business entity assumption

To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the:

Business entity assumption

An unearned Revenue

Cash received which is recorded as a debit to a Cash account and a credit to a liability account before revenue is earned is called

The Maxim Company acquired a building for $500,000. Maxim had the building appraised, and found that the building was easily worth $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Maxim to record the building on its records at $500,000?

Cost principle

An accountant has debited an asset account for P 1,000 and credited a liability account for P500. Which of the following would be an incorrect way to complete the recording of the transaction?

Credit an asset account for P500

Withdrawals by owners are treated as

Decrease in equity, but not as expenses

A credit is used to record

Decreases in assets, increases in liabilities, increases in equity

Which account could appear in an adjusted trial balance but would not be included in an unadjusted trial balance?

Depreciation Expense

allocating the cost of an asset to expense over its useful life in a systematic manner

Depreciation is the process of

Accounting is an information and measurement system that does all of the following except:

Does not use technology to improve accuracy in reporting

Accrued revenue is

Earned but not yet received or recorded

The IASB Conceptual Framework has 2 enhancing qualitative characteristics and 4 fundamental qualitative characteristics.

False

The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the:

Going-concern assumption.

The income statement will present`

How profitable a company has been during the period covered by the statement.

Closing entries are made

In order to transfer profit (or loss) and owner's drawing to the owner's capital account.

The IASB Conceptual Framework:

Includes fundamental and enhancing qualitative characteristics

If the liabilities of a business increased P75,000 during a period of time and the owner's equity in the business decreased P30,000 during the same period, the assets of the business must have:

Increased P45,000.

A company acquires equipment for P75,000 cash. This represents a(n)

Investing activity

Operating activities:

Involve using resources to research, develop, purchase, produce, distribute and market products and services.

A ledger

Is a collection of the entire group of accounts maintained by a company

statements about the post-closing trial balance

It contains only permanent accounts. It shows that the accounting equation is in balance.

The area of accounting aimed at serving the decision making needs of internal users is:

Managerial Accounting

Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

Matching principle

The accounting concept that requires financial statement information to be supported by independent, unbiased evidence other than someone's belief or opinion is:

Objectivity

An example of a financing activity is

Obtaining a long-term loan

A furniture company acquires a furniture for sale for P75,000 cash. This represents a(n)

Operating activity

If assets are P365,000 and equity is P120,000, then liabilities are

P245,000.

If assets are P99,000 and liabilities are P32,000, then equity equals

P67,000.

debit to an expense account and a credit to an asset account

Prepayments are initially debited to an asset account. As the prepaid expense expires with the passage of time, the correct adjusting entry will be a

Internal users of accounting information example

Purchasing managers.

The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services, is called the:

Revenue recognition principle.

The income statement reports are

Revenues of a business Profit of a business Expenses of a business

Which of these would not result in unearned revenue?

Sales on Credit

A debit balance in which of the following accounts would most likely signify an error?

Service Revenue

The financial statement that shows the beginning balance of owner's equity; the changes in equity that resulted from new investments by the owner, net profit (or net loss); withdrawals; and the ending balance, is the:

Statement of changes in equity

going-concern assumption.

The idea that a business will continue to operate instead of being closed or sold underlies the

An error has occurred in the closing entry process if

The permanent accounts have zero balances.

A statement of financial position or a statement of financial position lists

The types and amounts of assets, liabilities, and equity of a business as at a specific date.

The primary objective of financial accounting is:

To provide financial statements to help external users analyze an organization's activities.

Viscount Company collected P42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:

Total assets, total liabilities, and equity are unchanged.

An equal trial balance means that

Total debits equal total credits

Posting

Transfers journal entries to ledger accounts

The basic financial statements include all of the following except:

Trial balance

Events that change a company's financial statements are recognised in the period they occur rather than in the period in which cash is paid or received

Under accrual-basis accounting

Which is not an advantage of a sole proprietorship business?

Unlimited liability

Revenue is properly recognized:

Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.

Journalizing

__________________________ errors should be erased, and a correct entry made

When using a worksheet adjusting entries should be journalized

after the worksheet is completed but before financial statements are prepared.

A business purchased equipment by issuing a one-year note payable. The entire amount of the note is due at the end of one year. Recording the transaction requires

an asset to be debited, a liability to be credited

Olivia, the proprietor of a Laundry Shop, deposited P40,000 in the company's bank account. She got the money from selling all of her San Miguel Corporation shares. Recording the transaction on the company books will require

an asset to be debited, capital to be credited

Solar Security Agency determined that its general manager should attend a leadership workshop to be held at Boracay. The workshop cost P15,000, including airfare, meals, and lodging. The agency charged the cost of the trip with a local travel agency. Recording the transaction requires

an expense to be debited, a liability to be credited

Solar Security Agency paid the rent for the month of January on January 1. Recording the transaction requires

an expense to be debited, an asset to be credited

In the balance sheet, assets are listed:

by liquidity

To enter the profit for the period into the worksheet requires an entry to the

income statement debit column and the statement of financial position credit column.

Objectivity

means that financial information is supported by independent unbiased evidence.

The proprietor of a restaurant purchased a three-year insurance policy. Recording the purchase of the policy requires

one asset to be debited, another asset to be credited

A worksheet is a multiple column sheet that facilitates the

preparation of financial statements

If the total amount of the items debited is greater than the total amount of the items credited in the statement of financial position columns of the worksheet, owner's equity

will increase because a profit has occurred.