Int

roduct
iont oAccounting
Learni
ngObj ecti
ves
1.Def i
neaccount i
ng.
2.Descr ibethenatureandpur poseofaccount i
ng.
3.Giv eexampl esofbranchesofaccount ing.
4.Stat ethefuncti
onofaccount inginabusi ness.
5.Differenti
atebetweenext er
nal andint
ernal user
sofaccount
ingi
nfor
mat
ion.
6.Nar ratethehist
ory/or
iginofaccount i
ng.
7.Stat etheformsofbusi nessor gani
zati
on.
8.Stat ethetypesofbusinessaccor di
ngt otheiracti
vi
ti
es.

Defi
nit
ionofaccounti
ng
Accounti
ngisaprocessofident
if
ying,
recor
dingandcommuni
cat
ingeconomi
cinf
ormat
iont
hati
susef
uli
n
makingeconomicdecisi
ons.

Essent
ialel ement soft hedef initionofaccount ing
1. Ident i
fying–Theaccount antanal yzeseachbusi nesst r
ansact i
onandi dent i
fi
eswhet herthe
transact i
oni san“ account ableev ent”or“non-accountableev ent.
”Thisisbecauseonl y“ account able
ev ents”ar er ecor dedi nt hebooksofaccount s.“Non-account ableevents”arenotrecor dedint he
booksofaccount s.
2. Recor ding–Theaccount antrecogni zes(i.
e.,
records)the“ accountableevents”hehasi denti
fied.
Thi spr ocessi scal l
ed“ jour nal
izing.”Aft
erjournali
zing,t
heaccount antthenclassif
iest heeffectsof
theev entont he“ account s.”Thi sprocessiscalled“posting.”
3. Communi cating–Att heendofeachaccount i
ngper i
od,theaccount antsummar i
zest hei nf
ormat ion
processedi nt heaccount ingsy stem inordertoproducemeani ngfulreports.Accountinginformat ion
i
scommuni cat edt ointer esteduser sthroughaccount i
ngr epor t
s,themostcommonf orm ofwhi chis
thef inanci alstat ement s.

Natur
eofaccount
ing
Account
ingisapr
ocesswiththebasi
cpur poseofpr
ovi
dingi
nfor
mat
ionabouteconomi
cact
ivi
ti
esi
ntended
tobeusefuli
nmakingeconomicdeci
sions.

Ty
pesofinf
ormat ionpr ovi
dedbyaccount
ing
1.Quanti
tati
v einformati
on
2.Qual
it
at i
vei nf
ormat i
on
3.Fi
nancialinformation

Funct
ionsofAccounti
ngi nBusi
ness
1.Topr ov
ideext
ernaluserswit
hinfor
mati
onthati
suseful
inmaki
nginv
est
mentandcredi
tdeci
sions;
and
2.Topr ov
idei
nternaluser
swithinf
ormat
iont
hatisusef
uli
nmanagingt
hebusi
ness.

Br
iefhi
storyofaccount ing
• Account ingcanbet r
acedasf arbackast hepr ehistoricti
mes, perhapsmor et han10, 000y ear
sago.
• Archaeol ogistshav efoundcl ayt okensasol das8500B. C.inMesopot amiawhi chwer eusuall
y
cones, disks,spher esandpel lets.Theset okenscor respondtocommodi t
ieslikesheep, clothi
ngor
bread.Theywer eusedi ntheMi ddleWesti nkeepi ngr ecords.Aftersomet i
me, thet okenswer e
replacedbywetcl aytablets.Dur i
ngsucht i
me, exper tsconcludedt hi
stobet hestartoft heartof
wr i
ti
ng.(Sour ce: htt
p://Ezi
neAr t
icles.com/ 456988)
• Doubl eent r
yr ecordsf i
rstcameoutdur ing1340A. D.inGenoa.
• In1494, thef i
rstsy st
emat icr ecor dkeepi ngdeal ingwi ththe“ doubleentryrecordingsy stem”was
formulatedbyFr aLucaPaci oli,aFr anciscanmonkandmat hemat i an.The“
ci doubl eentryrecordi
ng
system”wasi ncludedi nPaci oli
’sbookt it
led“ SummadiAr it
hmet icaGeomet r i
aPr oporti
oniand
Propor t
ionista,”publi
shedonNov ember10, 1494i nVenice.
• Theconceptof“ doubl eentryr ecor ding”isbei ngusedt othisday .Thus,FraLucaPaci olii
s
consideredast hef atherofmoder naccount i
ng.
CommonBr
anchesofAccount
ing
UsersofAccountingInformation
1. I
nter
naluser s–t hosewhoar edir
ectl
yinv ol
v edinmanagi ngthebusiness.Exampl es:
• Busi nessowner swhoar edirectlyi
nv olvedinmanagi ngthebusiness
• Boar dofdi r
ectors
• Manager i
alpersonnel
 
 
2. Ext
ernalusers–t hosewhoar enotdirectlyi
nv olvedinmanagi ngthebusiness.Exampl es:
• Existingandpot enti
alinvestor
s( e.
g.,stockholder
swhoar enotdirect
lyinvolvedinmanagi
ng
t
hebusi ness)
• Lender s(e.g.
,banks)andCr editors(e.g.,suppl
ier
s)
• Non- manager i
alempl oyees
• Publ ic

For
msofBusi
nessOr
gani
zat
ions

Adv
ant
agesandDi
sadv
ant
ages
Ty
pesofBusinessAccordingtoAct
ivi
ti
es
1.Ser
vicebusiness
2.Merchandisi
ng(Tradi
ng)
3.Manufacturi
ng
Accounti
ngConceptsandPrinci
ples
Learni
ngObject
ives
1.Giveexamplesofaccounti
ngconcept
sandpri
nci
ples.
2.Applytheconcept
sinsolvi
ngaccount
ingpr
obl
ems

BasicAccount ingConcepts
1.Separateentityconcept 7.Ti
mePer i
od
2.Histor
icalcostconcept 8.St
ablemonet aryuni
t
3.Goingconcer nassumption 9.Materi
ali
tyconcept
4.Matching 10.Cost-
benefi
t
5.AccrualBasis 11.Full
discl
osur epri
nci
ple
6.Prudence( orConservat
ism) 12.Consist
encyconcept

• Separ ateent it
yconcept–Thebusi nessi sv i
ewedasasepar ateent it
y ,di
stinctf r
om i t
sowner (s).
Onl yt hetransact i
onsoft hebusi nessar er ecordedinthebooksofaccount s.Theper sonal
transact ionsoft hebusinessowner ( s)ar enotr ecorded.
• Hi storicalcostconcept( Costpr incipl e)–asset sareini
ti
all
yr ecordedatt heiracquisitioncost .
• Goi ngconcer nassumpt ion–Thebusi nessi sassumedt ocont i
nuet oexi stforani ndef init
eper iod
oft ime.
• Mat ching–Somecost sar eini
tiall
yr ecogni zedasassetsandchar gedasexpensesonl ywhent he
relatedr evenuei srecogni zed.
• Accr ualBasi sofaccount ing–i ncomei sr ecordedintheperiodwheni tisear nedrathert hanwheni t
i
scol lected, whil
eexpensei srecor dedi nt heperiodwhenitisi ncurredr athert hanwheni tispaid.
• Pr udence–Theobser vanceofsomedegr eeofcaut i
onwhenexer cisingjudgment sundercondi tions
ofuncer tainty.Suchthat,iftherei sachoi cebet weenapot ential
lyunf avorableout comeanda
pot ent i
all
yf avorabl
eout come, t
heunf avor ableoneischosen.Thi si snecessar ysot hatasset sor
i
ncomear enotov erst
atedandl iabilitiesorexpensesar enotunder stated.
 • Repor ti
ngPer iod–Thel i
feoft hebusi nessi sdivi
dedi ntoser i
esofr eport
ingper iods.
• Stablemonet aryunit–Asset s,liabi
l
ities,equity,
incomeandexpensesar estatedi ntermsofa
commonuni tofmeasur e,whi chi sthepesoi nthePhi lippines.Mor eover
,thepur chasingpowerof
thepesoi sregar dedasst able.Ther efore, changesi nthepur chasi ngpoweroft hepesoduet o
i
nflati
onar eignor ed.
• Mat eri
ali
tyconcept–Ani tem i sconsi deredmat erialifitsomi ssi onormi sstatementcoul dinfl
uence
economi cdeci si
ons.Mat eriali
tyi samat erofpr
t ofessionalj udgmentandi sbasedont hesi
zeand
natureofani tem beingjudged.
• Cost -
benefit–Thecost sofpr ocessingandcommuni cat inginfor mat i
onshouldnotexceedt he
benefitstobeder i
vedfrom t hei nfor
mat ion’suse.
• Fulldiscl
osur epr i
ncipl
e–I nf ormat i
oncommuni cat edt ouser sr eflectabalancebet weendet ai
land
conciseness, keepinginmi ndt hecost -benef i
tprincipl
e.  
• Consistencyconcept–Li ket ransactionsar eaccount edf orinlikemannerf rom per i
odt operi
od.

Phi
li
ppineFinancialReporti
ngStandar ds(PFRSs)
ThePFRSsar eStandardsandI nt
erpretat
ionsadopt edbyt
heFRSC.Theyconsi
stoft
hef
oll
owi
ng:
1.Phi l
i
ppineFinancialReport
ingStandards( PFRSs);
2.Phi l
i
ppineAccount i
ngStandards( PASs);and
3.Interpr
etat
ions

Qual i
tat
iveChar acteri
stics
I. Fundament alQual it
ati
veChar acteri
sti
cs
i. Relevance( Predict
iveValue,Confir
matoryVal
ue,
Mat
eri
ali
ty)
ii.Fai
thful Represent ati
on(Compl eteness,Neut
ral
it
y,
Freef rom er r
or)
I
I.Enhanci ngQual i
tati
v eCharacter
istics
i.Compar abil
ity
i
i.Verif
iabilit
y
ii
i.Timeliness
iv.Under st
andabi lit
y

Fundament alv s.Enhanci ng

• Thef undament alqual itati
vechar act eristicsar et hechar acteristi
cst hatmakei nformationusefult
o
user s.
• Theenhanci ngqual i
tativechar acter i
sticsar ethechar acteristi
csthatenhancet heusefulnessof
i
nf or mat i
on
Relevance
• I nf or mat i
oni sr elev anti fitcanaf fectt hedeci si
onsofuser s.
• Rel ev anti nfor mat ionhast hef ol l
owi ng:
a. Pr edict iveval ue–t hei nformat i
oncanbeusedi nmaki ngpredict i
ons
b. Conf ir
mat oryval ue–t hei nf ormat ioncanbeusedi nconf ir
mi ngpastpr edicti
ons
c. Mat eriality–i san‘ ent i
ty -
speci f
ic’ aspectofr el
ev ance.
Fai
t hf
ulr epr esent ation
• Fai thf ulrepr esent ationmeanst hei nformat i
onpr ovidesat r
ue, correctandcompl etedepicti
onof
whati tpur por tst or epr esent .
• Fai thf ul
lyr epr esent edi nfor mat ionhast hef ol
lowing:
a. Compl et eness–al l i
nfor mat ionnecessar yforuser st ounder standthephenomenonbei ng
depi ctedi spr ovided.
b. Neut rality–i nfor mat i
oni ssel ectedorpr esent edwi thoutbi as.
c. Fr eef rom er ror–t herear enoer rorsint hedescr i
ptionandi nthepr ocessbywhi chthe
infor mat i
oni ssel ect edandappl ied.
Enhanci ngQual i
tativeChar acter i
st i
cs
1.Compar abi l
ity–t hei nfor mat ionhel psuser sinident i
fyingsi milar
it
iesanddi f
ferencesbetween
differentset sofi nf ormat i
on.
2.Ver ifi
abi l
ity–di ff
er entuser scoul dr eachconsensusast owhatt hei nformationpurportsto
repr esent .
3.Ti mel i
ness–t hei nf ormat ioni sav ailablet ouser sint i
met obeabl et oi nf
luencetheirdecisi
ons.
4.Under standabi lity–user sar eexpect edt ohav e:
a.r easonabl eknowl edgeofbusi nessact i
viti
es; and
 b.wi
l
li
ngnesst
oanal
yzet
hei
nfor
mat
iondi
l
igent
ly.

TheAccountingEquati
on
Learni
ngObjecti
ves
1.Ill
ustr
atetheaccount
ingequat
ion.
2.Perform oper
ati
onsinvol
vi
ngsimplecaseswi
tht
heuseofaccount
ingequat
ion.

TheAccount
ingEquat
ion
Asset
s= Li
abi
li
ti
es + Equi
ty

Def
ini
ti
ons
• ASSETS–ar etheeconomi cresourcesyoucont r
olt
hathav er
esul
tedfom pastev
r entsandcan
provi
deyouwitheconomicbenef i
ts.
• LI ABI
LITI
ES–ar eyourpresentobligat
ionsthathaveresul
tedfom pastev
r entsandcanrequi
reyou
togiv
eupeconomi cresourceswhenset tl
i
ngt hem.
• EQUI TY–i sasset
smi nusli
abil
iti
es.

TheExpandedAccount
ingEquati
on
Asset
s=Liabil
it
ies+Equi
ty+Income-Expenses

Def
ini
ti
ons
• I NCOME–i si
ncr easesineconomi cbenef i
tsduringtheperi
odi ntheform ofi
ncreasesi nassets,
or
decreasesinliabili
ti
es,thatresul
tinincreasesi
nequi ty,
excludi
ngt hoserel
ati
ngt oinvestmentsby
thebusinessowner .
• EXPENSES–ar edecr easesineconomi cbenefitsduringtheperiodintheform ofdecreasesin
assets,orincr
easesi nliabil
it
ies,
thatresulti
ndecr easesinequit
y ,
excludi
ngthoserelatingto
dist
ributi
onstot hebusinessowner .
• Thedi ff
erencebet weeni ncomeandexpensesr epresentsprofi
torloss.

Appli
cat
ionsoft heaccounti
ngequation
1.Iftotalasset
sis₱10,000andt otall
iabil
iti
esi s₱6, 000,howmuchi st
het ot
al equit
y?
2.Iftotall
iabi
li
ti
esis₱5,000andt otalequityis₱4, 000, howmuchi sthetotalassets?
3.Iftotalasset
sis₱10,000andt otalequityis₱3, 000, howmuchi sthetotalli
abili
ti
es?
4.Iftotali
ncomei s₱10,000andt otalexpensesar e₱3, 000,howmuchi stheprof i
torloss?
5.Iftotali
ncomei s₱10,000,
totalexpensesar e₱8, 000, t
otall
iabi
li
tiesi
s₱7, 000, andtotal
equi
ty
(
beforeprofi
torloss)i
s₱6,000, howmuchi sthet otalassets?

QUI
Z#1:MULTI
PLECHOI
CE

1.Whichoft hefoll
owingstatementsregardingaccount i
ngi sincorr
ect
?
a. Allbusinesstr
ansactionsandeventsar erecordedint heaccounti
ngbooks.
b. Alt
houghbookkeepi ngandaccount i
ngar einterr
elated,theyarenotthesame.
c. Thepur poseofaccount i
ngistoprovideinformationthatisusefuli
nmaki ngeconomicdeci
sions.
d. At ransacti
onorev entisrecor
dedint heaccount i
ngr ecordsonlyifithasaneffectontheassets,
l
iabili
ti
es,equi
ty,i
ncomeorexpensesoft hebusi ness.

2.Whichoft hefol
lowi
ngisnotoneoft henecessar
ypr
ocessesper
for
medi
naccount
ingi
nor
dert
o
pr
ov i
deinformati
onthati
susef
ult
oint
erest
edusers?
a. I
dentif
y i
ng
b. Summar i
zi
ng
c. Recording
d. Counting

3.Accounti
ngisdescri
bedinv ari
ousway s.Whi chofthefol
l
owingi
snotoneofthosedescr
ipt
ions?
a. Account
ingisaprocessandaser v
iceact ivi
ty.
b. Account
ingisasocialscienceandapr act i
calart
.
c. Account
ingi sthe“ l
anguageofbusi ness”becausei tisf
undamentaltothecommuni cat
ionof
fi
nanci
alinf
ormati
on.
d. Account
ingistheartofprofessi
onallysteali
ngmoneyandotherev
ilpur
poses.
4.Accounti
nghasal onghist
ory
.Whichofthef
oll
owingisincor
rectr
egar
dingt
hehist
oryofaccount
ing?
a. Account
ingcanbet r
acedasfarbackastheprehi
stori
cti
mes.
b. Account
ingisasol dascivi
l
izat
ionandhasev olvedinr
esponsetoeconomicandsocialneedsof
men.
c. Fr
aLucaPacioliist
hemamaofmoder naccounti
ng.
d. Al
lofthesearecorr
ect.

5.Themainpurposeofaccountingi
s
a. t
oaccountformoneysoi twil
lnotbelost
.
b. t
oprovi
deinformati
onthatisuseful
inmakingeconomicdeci
sions.
c. t
osafeguardtheasset
sofacompany .
d. t
oprovi
deacl earvi
ewoft hest
ateoftheindust
ry’
seconomy.

6.Inaccount i
ng,theter
m“r
ecor
ding”i
sal
socal
l
ed
a. journali
zi
ng.
b. communi cati
ng.
c. debiti
ng.
d. videoing.

7.Thisprocessr ef
erstot
her
epor
ti
ngoft
hei
nfor
mat
ionpr
ocessedi
ntheaccount
ingsy
stem t
oint
erest
ed
users.
a.Measur i
ng
b.I denti
fyi
ng
c. Communi cat
ing
d.Cl assi
fyi
ng

8.Whichoft hefollowingst atementsiscorrect

?
a. Fi
nanci alaccount ingisthebr anchofaccountingthatdeal
swi t
ht hespecif
icneedsofanent ity
’s
management .
b. Theinternaluser sofaccountinginformati
onincl
udemanagement ,ownersandcr edi
tor
s.
c. Theex ternaluser sofaccount inginformat
ionincl
udepotenti
alandexisti
ngi nvest
orsandlenders
andothercr editors.
d. Governmentaccount ingisthebr anchofaccountingthatdeal
swi ththeanal y
sisoft hecost
sof
productsandser vices.

9.Whichoft hefol
lowingstatement sisincorr
ect?
a. Err
oneousf i
nancialstatement scanleadt obadfi
nancialdeci
sions.
b. I
nternalusersoffinanci
al i
nformationrefertot
heent i
ty’
smanagementper sonnel.
c. Taxac counti
ngreferstothebr anchofaccount i
ngthatdealswithtaxcomputations,fi
l
ingoft
ax
ret
urns,andtaxplanning.
d. Accountingeducationisthebr anchofaccountingthatdealswiththet
eachingofaccount i
ngand
rel
atedsubjectsinordertopr oducecompet entandresponsibl
ebusinessprofessional
s.

10.Themostcommonf orm ofbusi

nessor
gani
zat
ioni
s
a. cor
poration.
b. sol
epropr i
etorship.
c. par
tnership.
d. cel
lphonest and.

11.Thi
sbranchofaccount i
ngfocusesoncat
eri
ngt
othei
nfor
mat
ionneedsofext
ernal s.
user
a. Managementacc ounti
ng
b. Fi
nancialaccount
ing
c. Audi
ting
d. Ext
ernalaccounti
ng

12.Theseuser sneedaccount i
nginfor
mati
oninordert
oregul
atebusi
nessest
hatar
ewi
thi
nthescopeof
thei
rlegal author
ity.
a.Empl oy ees
b.Cr editor s
c. Audi t
or s
d.Gov ernmentr egulat
orybodi
esoragenci
es
13.Theseusersneedaccountinginf
ormati
oni
neval
uat
ingt
hestabil
i
tyoft
hebusinessi
nsof
arast
hei
rjob
secur
ity,
futur
eremunerat
ion,andcar
eergr
owt
handopport
unit
iesar
econcer
ned.
a.Empl oyees
b.Cr edi
tors
c. Audit
ors
d.Regul at
oryaut
hori
ti
es

14.Thefol
lowingaredecisionsmadebyext ernalusersexcept
a.whet hertohol
dorsel li
nvest
mentsinstocks.
b.whet herornottoext endaloantothebusiness.
c. whethertosel
l goodsoncr edi
ttothebusiness.
d.whet hertoobtainadditi
onalcapi
talf
rom outsi
decr edi
tor
sort
ogener
atei
tint
ernal
l
y.

15.Whichoft hefoll
owingusersoffi
nanciali
nfor
mat i
oni snotconsider
edacredi
toroft
hebusiness?
a. Aloanpr ovi
der,suchasabank
b. Asuppl i
erthatsell
sgoodstotheentit
yoncr edi
t
c. Acustomert hatbuysgoodsfrom theenti
tyoncr edi
t
d. Afinancingcompanyt hatpr
ovidestheenti
tywithmachi ner
iesona“r
ent-t
o-own”basi
s

16.Iti
sthebranchofaccount i
ngt
hati
nv ol
vest
hecar
efulanal
ysi
sofeconomi
cev
ent
sandot
herv
ari
abl
es
tounderst
andtheiri
mpactondeci
sions.
a. Accounti
ngeducation
b. Costaccounti
ng
c. Accounti
ngresearch
d. Taxaccounti
ng

17.Itist he process ofobject

ivel
y ev
aluat
ing ev
idence and expr
essing an opi
nion r
egar
ding t
he
cor
respondencebet weenmanagement’
sasser
ti
onsandest abl
i
shedcri
teri
a.
a. Accountingeducati
on
b. Audit
ing
c. Accountingresear
ch
d. Taxac count
ing

18.Youownabusi ness.Yourbusi
nessi
sengagedi
nbuy
inggoodsatawhol
esal
epr
iceandr
esel
l
ingt
hem
atr
etai
lpricesonFacebook.Yourbusi
nessi
sa
a.servicebusiness.
b.manuf acturi
ngbusiness.
c. merchandisi
ngbusiness.
d.monkeybusi ness.

19.Anadv ant
ageofasol epr opr
iet
orshi
povertheotherf
ormsofabusinessor
gani
zat
ioni
s
a. youaretheonlybossandy oukeepal
ltheprofi
ts.
b. alt
houghiti
seasi ertoform,i
tmaybemor edif
fi
cul
ttor
aisef
inanci
ng.
c. i
thasunlimit
edl i
fe.
d. i
thaslimit
edliabi
lit
y.

20.Which ofthe f
oll
owi
ng is notan adv antage ofa par tnership overt he otherforms ofbusiness
or
ganizat
ion?
a. Comparedtoasol
epropriet
orshi
p,r
isksar espr eadoutovermor et hanoneowner .
b. Comparedtoacooperat
ive,
thebusi
nessor ganizat
ionisdriv
enmor etowardst heear
ningofpr
ofit
.
c. Comparedtoacorpor
ati
on,iti
seasiertofor m becauseoffewerl egalrequi
rements.
d. Comparedtoacorpor
ati
on,ithasanunlimitedl i
feandanunl i
mitedl i
abil
it
y.

QUI
Z#2:MULTI
PLECHOI
CE
1.Whichoft hef ol
lowi
ngt er
msmaynotr ef
ertot helogi
calnoti
onsandpr
ocedur
est
hatgui
det
he
account
antinrecordi
ngandcommuni cat
ingfi
nanci
ali
nformat
ion?
a. Accounti
ngconcept s
b. Accounti
ngprinci
ples
c. Accounti
ngstandards
d. Accounti
nglawsandr egulat
ions

2.Underthi
sconcept,
abusinessi
snotexpect
edt
oendi
tsoper
ati
onsi
ntheneart
erm.
a. Separ
ateenti
tyconcept
 b. Goi
ngconcer
n
c. St
ablemonet
aryuni
t
d. Mater
ial
i
ty

3.Tr
ansactionsandotherev
ent
sar
erecor
dedi
ntheper
iodsi
nwhi
cht
heyoccur
,notwhent
heyaf
fectcash.
a. Goingconcern
b. Accrualbasi
s
c. Reporti
ngperi
od
d. Consist
ency

4.Thepersonal t
ransactionsofthebusinessownert
hatdonotinvol
vet
hebusi
nessar
enotr
ecor
dedi
nthe
booksofaccount soft hebusiness.Thi
srel
atest
otheconceptof
a. Separateenti
t yconcept.
b. Goingconcern.
c. Stablemonet aryunit.
d. Mat er
ial
it
y.

5.Pr
esent ingal lamount sinthef
inanci
alst
atement
sinPhi
lippi
nepesosanddisregar
dingt
heef
fect
sof
i
nfl
ationont hepur chasi
ngpowerofthePhi
li
ppi
nepesor
elatetot
heconceptof
a. Separ ateentityconcept
.
b. Goingconcer n.
c. Stablemonet aryunit
.
d. Mat erial
ity.

6.Underthi
sconcept,t
hel
i
feoft
hebusi
nessi
sdi
vi
dedi
ntoser
iesofr
epor
ti
ngper
iods.
a. Ti
meper iod
b. Peri
odi
city
c. Report
ingperi
od
d. All
ofthese

7.Thebankingi
ndust
ryi
nthePhi
l
ippi
nesi
smai
nlyr
egul
atedbyt
he
a. CDA.
b. SEC.
c. BSP.
d. BIR.

8.TheSt andar
dsusedi nthePhili
ppinesarepat t
ernedfrom
a. U.S.GAAP.
b. SpanishStandards.
c. JapaneseFinancialReporti
ngSt andar
ds
d. i
nternati
onalstandards,cal
ledt heInter
nationalFi
nanci
alRepor
ti
ngStandar
ds(
IFRS)i
ssuedbyt
he
I
nternati
onalAccountingStandar dsBoard(IASB)whichi
sbasedintheU.
K.

9.Recor
dingassetsatt hei
racqui
sit
ioncost(
ent
ryv
alue)
,rat
hert
hanatt
hei
rnetsel
l
ingpr
ice(
exi
tval
ue)
,
i
sinli
newi t
htheconceptof
a.Singleenti
tyconcept.
b.Histori
calcostconcept.
c. Goi
ngconcer nconcept.
d.Mat chi
ngpr i
nci
ple.

10.Whichoft hefol
lowingr el
atestot heconceptofconsi stency
?
a. Treat
ingthebusi nessasasepar ateenti
tyfr
om i t
sowner .
b. Recordingsalesrevenuewhenasal eoccursratherthanwhent hesal
epri
ceiscol
l
ect
ed.
c. Meas uri
ngassetsatt heiracquisit
ioncost.
d. Usingthesameaccount ingtreatmentforsimilaritemsfrom peri
odtoper
iod.

11.Whichofthefoll
owingisanappli
cationoftheconceptofprudenceorconservati
sm?
a. Choosi
ngapot enti
all
yunfav
orableoutcomeov erapotenti
all
yfavorabl
eone.
b. Choosi
ngapot enti
all
yfav
orabl
eout comeov erapotenti
all
yunfavorabl
eone.
c. Del
iber
atelyunder
stati
ngasset
sandi ncomeanddel iber
atel
yov er
stati
ngl
iabil
i
tiesandexpenses.
d. Doi
ngnot hi
ngincasesofuncertaint
y.
12.Thecostofprovi
dingorusi
nginf
ormat
ionshoul
dnotexceedt
hei
nfor
mat
ion’
susef
ulness.
a. Materi
ali
ty
b. Cost-
benefi
torCostconst
rai
nt
c. Goingconcern
d. Rel
evance

13.Underthisconcept, somecostsarei
nit
ial
l
yrecogni
zedasasset
sandr
ecogni
zedonl
yasexpenseswhen
therel
atedrevenuei srecogni
zed.
a.Separ ateentit
yconcept
b.Hi stor
icalcostconcept
c. Goingconcer n
d.Mat chingpr i
nciple

14.Busi
nessesar er
equi r
edbyl awtof i
letaxr
etur
nswi
tht
hisgov
ernmentagency
.
a.Secur i
tyandExchangeCommi ssion
b.Bur eauofInt
ernal Revenue
c. Cooperati
veDev el
opmentAut hority
d.BangkoSent ralngPi l
i
pinas

15.Theaccounti
ngstandardsthatarecurr
entl
yusedinthePhi
l
ippi
nesar
eref
err
edt
oast
he
a. Phil
i
ppineFi
nancial
Repor t
ingStandar
ds(PFRS).
b. Phil
i
ppineGAAP.
c. Fi
li
pinoAccount
ingStandards(FAS).
d. Juan’sGAAP.

16.Theusef ulnessofi
nformati
onisassessedi
nter
msofi
ts
a. qualitati
vechar
acter
ist
ics.
b. verif
iabil
ity
.
c. ti
mel iness.
d. size.

17.Whichofthefoll
owi
ngi
soneoft
hef
undament
alqual
i
tat
ivechar
act
eri
sti
cs?
a. Comparabil
it
y
b. Rel
evance
c. Ti
meliness
d. Ver
if
iabil
it
y

18.Whichoft hefol
l
owi ngiscorrectconcerningthequali
tati
vecharacter
isti
cs?
a. Freef rom er
rormeanst heinformationcontai
nedi nthefi
nancialstatementsisperf
ectlyaccurat
ein
al
l respects.
b. Neut rali
tymeansi nfor
mat i
oni sselectedorpresentedwithbiast oincreasetheprobabili
tyt
hatthe
i
nfor mat i
onwill
ber ecei
v edfavorabl
ybyt heusers.
c. I
nf ormat i
onthatisnotcapabl eofaffecti
ngthedecisionsofusersisconsideredir
rel
evant.
d. Theenhanc i
ngqual i
tat
ivechar act
eri
sticscanconvertnon-usef
ulinfor
mat iontousef
ulinformat
ion.

19.Abusi nesspur chasedequipmentfor₱10,000butdel

i
ber
atel
yrepor
tedi
tas₱100,
000.Whi
choft
he
fol
l
owi ngprinci
plesismostlikel
ynotvi
olat
ed?
a. Faithf
ulrepresentat
ion
b. Freefrom error
c. Histori
calcost
d. Mat er
ial
ity

20.Thi
squalitati
vecharact
eri
sti
crequi
resatl
eastt
woi
tems.
a.Compar abil
i
ty
b.Timeliness
c. Ver
if
iabili
ty
d.Under standabi
li
ty

QUI
Z#3:MULTI PLECHOICE
1.Iti
saneconomi cr
esourcecont
roll
edbyt heent
it
ythathasr
esul
tedf
rom pastev
ent
sandhasapot
ent
ial
toproduceeconomicbenef
it
s.
a. As set c.Equit
y
b. Liabil
i
ty d.Income
2.Theter
m‘ economi
cresour
ce’
connot
es
a. anasset. c.anequit
y.
b. ali
abi
lit
y. d.al
lofthese

3.Theter
m‘ pr
esentobl
i
gat
ion’
connot
es
a. anasset
. c.anequit
y.
b. ali
abi
li
ty. d.al
lofthese

4.Theclai
m oftheowner
(s)ont
hetot
alasset
sofanent
it
yisal
socal
l
ed
a. asset
s. c.equi
ty.
b. l
iabi
li
ti
es. d.prof
it
.

5.Iti
sapr esentobli
gati
onthathasresultedfr
om pastev
ent
sandhast
hepot
ent
ialt
ocauseat
ransf
erof
aneconomi cresourcei
nit
ssettl
ement .
a. asset. c.expense.
b. l
iabi
li
ty. d.income.

6.Abusinessowner’scontr
ibut
iontot
hebusinessresul
tsi
n
a. anincreasei
nassetsandanincreasei
nincome.
b. adec r
easeinassetsandanincr
easeinowner’sequi
ty.
c. anincreasei
nassetsandanincreasei
nliabi
l
iti
es.
d. anincreasei
nassetsandanincreasei
nowner ’
sequi
ty.

7.Indi
cati
ngtoothers,
throughy ourpastact
ion,
t haty
ouwi l
lacceptanddi
schar
gecertai
nresponsi
bil
i
ties,
ther
ebycreati
nganexpect at
iononthem thatyouwilldoso,cr
eatesanobl
igat
ioncal
l
ed
a. l
egalobli
gati
on.
b. constr
ucti
onobli
gation.
c. i
ndicat
iveobl
igat
ion.
d. constr
ucti
veobli
gati
on.

8.Adecreaseint
heeconomi
cbenefi
tsofar esour
cewoul
dbet
reat
edas
a. asset
. c.expense.
b. l
iabi
li
ty. d.income.

9.Whichoft hefol
lowingwouldnotgi
veri
setoincome?
a. enhancementi ntheval
ueofanasset
b. decreaseinli
abil
iti
es
c. i
nvestmentbyt hebusinessownert
othebusiness
d. al
loft hese

10.Inwhichofthefoll
owingdi
dal ossoccur?
ASSETS =LI ABI
LITIES+EQUITY + INCOME-EXPENSES
a. ₱920,000 ₱710,000 ₱290,000 ₱440, 000 ₱520, 000
b. ₱870,000 ₱310,000 ₱240,000 ₱470, 000 ₱150, 000
c. ₱890,000 ₱240,000 ₱240,000 ₱600, 000 ₱190, 000
d. ₱740,000 ₱530,000 ₱170,000 ₱1,900,000 ₱1,
860,000

11.Inaccounting,anegat
iveamountisnor
mal
l
ypr
esent
ed
a. beginni
ngwi thaminussign.
b. asas queezedamount .
c. inparentheses.
d. negativ
ely.

12.Assetsandl iabi
li
ti
esr
esul
tfr
om
a. pas tevents.
b. futureevents.
c. i
ncomeandexpenses.
d. l
ifeev ents.

13.Whichofthefol
l
owingisincorr
ectregar
dingprof
it
?
a. Prof
iti
smeasuredonlyindi
rectl
yasanarit
hmetical
dif
fer
ence.
b. Prof
iti
stheexcessoftotal
incomeov ert
otal
expenses.
 c. Pr
ofi
tincr
easesequi
ty.
d. Pr
ofi
tisearnedi
ftot
ali
ncomei
slesst
hant
otal
expenses.

14.Abusinessincur
stot
alexpensesof₱630,
000andr
epor
tsl
ossof₱270,
000.How muchi
sthet
otal
i
ncome?
a. 900,
000
b. 320,
000
c. 380,
000
d. 360,
000

15.Whichoft
hefol
l
owingwoul
dresul
ttototal
expensesof₱480,
000?
a. Tot
ali
ncomeof₱360,
000andprofi
t₱120,000
b. Tot
ali
ncomeof₱580,
000andlossof₱100,000
c. Tot
ali
ncomeof₱630,
000andprofi
tof₱150,000
d. Tot
ali
ncomeof₱630,
000andlossof₱150,000

16.Whi
choft
hef
oll
owi
ngi
sacor
rectaccount
ingequat
ion?

ASSETS LI
ABILI
TIES EQUITY
a. ₱460,
000 ₱190,
000 ₱170,000
b. ₱230,
000 ₱150,
000 ₱70,000
c. ₱1,
120,
000 ₱990,
000 ₱130,000
d. ₱1,
020,
000 ₱510,
000 ₱410,000

17.Whi
choft
hef
oll
owi
ngi
sacor
rectaccount
ingequat
ion?

ASSETS LI
ABILI
TIES EQUI
TY I
NCOME EXPENSES
a. ₱920,
000 ₱710,
000 ₱290,
000 ₱440,000 ₱420, 000
b. ₱870,
000 ₱310,
000 ₱240,
000 ₱570,000 ₱150, 000
c. ₱890,
000 ₱240,
000 ₱340,
000 ₱600,000 ₱190, 000
d. ₱740,
000 ₱530,
000 ₱170,
000 ₱1,
900,000 ₱1,
860,000

18.Enti
tyAhadtotalassets,l
iabil
i
ties,
andequit
yof₱130M, ₱80M and₱50M,respecti
vely
,atthebegi
nni
ng
oftheperi
od.Duringtheperiod,Enti
tyA’
stotalli
abi
l
iti
esdecreasedby₱20M, whil
eitsprof
itwas₱25M.
Therewerenoot hertransacti
onsorev ent
st hataf
fectedequit
yduri
ngtheperiod.Howmuchi sEnt
it
y
A’sendi
ngtotalasset
s?
a. ₱95M
b. ₱135M
c. ₱85M
d. ₱125M

19.Enti
tyAhadtotalassets,l
iabil
i
ties,andequi
tyof₱150M, ₱90M and₱60M,respecti
vely
,atthebegi
nni
ng
oftheperi
od.Duringtheper i
od, Ent
it
yA’stot
alli
abi
li
ti
esdecreasedt
o₱40M, whil
eitsprof
itwas₱25M.
Therewerenoot hertransacti
onsorev entsthataf
fect
edequitydur
ingtheperiod.Howmuchi sEnt
it
y
A’sendi
ngtotalasset
s?
a. ₱75M
b. ₱115M
c. ₱95M
d. ₱125M

20.Enti
tyAhadt otalassetsof₱120M andtot
all
i
abi
li
ti
esof₱80M att
hebegi
nni
ngoftheper
iod.I
fatt
he
endoftheper i
od,totalasset
sincr
easedby₱30M,whil
etot
all
iabi
l
iti
esr
emai
nedthesame,Enti
tyA’
s
tot
alequi
tyattheendoft heperi
odwouldbe
a. ₱70M
b. ₱90M
c. ₱60M
d. ₱80M

21.Ent
ityAhadt ot
alasset
sandt otall
iabil
i
tiesof₱120M and₱85M,respecti
vel
y,atthebegi
nni
ngofthe
per
iod.Dur
ingtheperi
od,Enti
tyAear nedt ot
ali
ncomeof₱60andincurredtot
alexpensesof₱45.How
muchisEntit
yA’sendi
ngtotalequi
ty?
a. ₱60M
 b. ₱90M
c. ₱50M
d. ₱120M

22.Enti
tyAhadt ot
alasset
sandt ot
all
iabil
it
iesof₱150M and₱80M,r espect
ively
,atthebeginningofthe
peri
od.Duri
ngtheperi
od,Ent
it
yAear nedtotalincomeof₱60andincur
redtotalexpensesof₱40.Entit
y
A’stotalasset
sdecreased t
o ₱130M byy ear-
end.Therewer
eno addi t
ionalcontri
buti
onsby ,or
di
stri
buti
onsto,t
heownerduri
ngtheperiod.Howmuchi sEnt
it
yA’
sendingtotall
iabi
li
ti
es?
a. ₱60M
b. ₱80M
c. ₱70M
d. ₱40M

23.Enti
tyAhasendi
ngtot
alasset
sof₱90M andendi
ngt
otall
i
abi
l
iti
esof₱60M.Ent
it
yAhadabeginni
ng
equit
yof₱10M.IfEnt
ityAearnedt
otali
ncomeof₱45M dur
ingtheyear
,how muchwer
ethetotal
expenses?
a. ₱0
b. ₱20M
c. ₱15M
d. ₱25M

24.Enti
tyAhasendi
ngtot
alassetsof₱150M andendingt
otall
i
abi
li
ti
esof₱90M.Enti
tyAhadabeginni
ng
equi
tyof₱30M.IfEnt
it
yAi ncur
redtot
alexpensesof₱50M dur
ingtheyear
,how muchwasthetotal
i
ncome?
a. ₱90M
b. ₱40M
c. ₱50M
d. ₱80M

25.Atyear-
end,Ent
it
yA’stotalasset
sandt ot
alli
abi
l
iti
esare₱190M and₱70M, r
espect
ivel
y.I
fEnt
it
yAhad
abeginni
ngequityof₱145M andt her
ewer enocontr
ibuti
onsfr
om, ordi
str
ibut
ionst
o, t
heownerdur
ing
theperi
od,howmuchpr ofi
t(l
oss)didEnti
tyAearn(i
ncur)dur
ingtheyear
?
a. ₱35M
b. ₱25M
c. (₱35M)
d. (₱25M)