Introduction to Accounting QUIZ 1: TRUE OR FALSE Instruction: Before each statement, write TRUE if the statement is correct or FALSE if the statement is incorrect. 1. Only accountable events are recorded in the accounting books. 2. Accounting is a service activity. 3. Although bookkeeping and accounting are interrelated, they are not the same. 4. The purpose of accounting is to provide information that is useful in making economic decisions. 5. Accounting is often referred to as the “language of business” because it is fundamental to the communication of f i nancial information. 6. A transaction or event is recorded in the accounting records only if it has an ef fect on the assets, liabilities, equity, income or expenses of the business. Accounting can be traced as far back as the prehistoric times, Bookkeeping normally ends with the preparation of the trial balance. Accounting is as old as civilization and has evolved in response to economic and social needs of men. 10, Fra Luca Pacioli is the mother of modern accounting, True lahat except |O “Be strong and courageous. Do not fear of be in dread of them, for it is the Lord your God who goes with you. He will not leave you or forsake you.” (Deuteronomy 31:5} - END -EXERCISES | True or False 10. 1. 12, A partnership is a business owned and operated by two or more persons who bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the prof its among themselves. A partnership is always owned by two individuals, F Partners in general have limited liability, that is, their personal properties may be used in the settlement of the liabilities of the partnership.F A partnership is a contract between partners; thus, an existing partnership is dissolved whenever there is a change in its composition (i.¢., death of one of the partners, incapacity of a partner, withdrawal or retirement of a partner).T The owners of a corporation are called shareholders. T When a partnership has f ive or more partners, it automatically converts into corporation. F One characteristic of a corporation is that shareholders are personally liable for any losses incurred in the business. F Business is primarily concerned with income or prof it, though other purposes may have prompted its creation. T » ‘A merchandising business is one which buys goods from suppliers and sells them for a price not higher than cost. F Aservice business is the most basic legal form of business organization. F Manufacturing entities always earn more than merchandising entities. F One of the major disadvantages of a sole proprietorship over a partnership is the lesser amount of capital that it can accumulate during the formation stage. T From the accounting viewpoint, the sole proprietorship is distinct from its proprietor. T A separate legal entity organized in accordance with codes and laws and in which ownership is divided into shares of stock is referred to as a corporation. T The limited liability of stockholders is one of the reasons why the corporate form of organization is dominant in the business world today. TTrue or False Cost accounting records guide managers in setting prices for their products and services to achieve greater prof i ts. T An audit is the independent examination (by a CPA) of an entity's fi nancial statements for the purpose of expressing an opinion on the fairness of these statements. T Presidential Decree 1081 governs the practice of accountancy in the Philippines. F To be a CPA, one must f inish a degree in Bachelor of Science in Accountancy and pass a rigorous licensure examination given by the Board of Accountancy. T ACPA candidate must have an average of at least 75% with no grade lower than 60% in order to pass the CPA Board Examinations. F Candidates who fail three times shall be barred from taking another CPA. F Government accounting deals with the proper custody, disposition and accounting for private funds. F One of the marks of a profession is adherence by its members to a common code of values and conduct established by its administrating body, including maintaining an outlook which is essentially subjective. F There are four sectors of the accountancy profession today: public practice, commerce and industry, education, and government. T CPAs employed in a business enterprise as accounting staf f, chief accountant, internal auditor or controller, are practicing in the public sector. F A CPA may practice in two sectors at the same time, for example, holding a public accounting practice at the same time teaching accounting in a university. T One of the disadvantages of a corporation is that it is subject to greater scrutiny and regulation by the government. T Accounting is often characterized as the “language of business.’ T Bookkeeping is the procedural portion of the accounting process. T Double-entry bookkeeping was invented by Friar Luca Pacioli. T Accounting identif ies measures and communicates information about economic entities for use in making economic decisions. T Management accounting is concerned primarily with external reporting. F18. Cost accounting measures a business's costs to help management in controlling expenses.T 19. The Professional Regulation Commission is the specif ic body authorized by law to promulgate rules and regulations that af fect the practice of accountancy in the Philippines. F 20. The members of the Professional Regulatory Board of Accountancy are appointed by the Professional Regulation Commission (PRC). F Ill Matching Type Choices A. Business enterprises G. Corporation B. Incorporators H. Managerial accounting C. Single proprietorship |. Bookkeeping D. Financial accounting J. Public accounting E. Partnership K. Comptroller F. Service business L. Merchandising business %. A business organization owned by one person. C Ss The area of accounting that provides audit & tax services. J 3. Chief accounting of f i cer of a large business organization K 4. The aspect of accounting that is related to the recording of transactions up to the preparation of financial statements. | 5. Field of accounting that deals with providing information needs of the internal decision makers. H 6. Group of persons that initially organized a corporation. B t. Organizations that are formed for the purpose of making prof itB 8. Branch of accounting that is concerned primarily with the preparation of general purpose financial statements. D 9. A trading business L 1 0. Two or more individuals, joining their resources together to form a business. EIV Multiple Choices 1. This is the primary goal of business: A. Prof it. B. Increase in the selling price of its products or services. C. Make aname in the community. D. None of these. This is the simplest form of business and it involves the provision of services to clients or customers in exchange for a fee. A Sole proprietorship. C. Merchandising concern. B. Service business. D = Manufacturing business. The following are examples of companies engaged primarily in the merchandising business, except: A. Inigo General Merchandising. B. Magic Book Retailers, Inc. C. Winner Hardware Store. D Triple | Watch Repair. As a minimum, how many individuals are required to form a corporation? a partnership? A. CORPORATION = FIVE PARTNERSHIP = FIVE B. CORPORATION = TWO. PARTNERSHIP = TWO C. CORPORATION = FIVE PARTNERSHIP = TWO D. CORPORATION = TWO PARTNERSHIP = FIVE The purpose of accounting is to provide primarily: A. Quantitative and qualitative information. B. Quantitative information only, C. Qualitative information only. D. No choice applicable.Presented below are the advantages of a partnership over a sole proprietorship. Select the exception: A. Better decision-making. B. Personal involvement in the business. C. Larger capacity to raise capital. D. None of these. This is the most dominant legal form of business organization in the Philippines today: A Service business. C. Partnership. B. Sole proprietorship. D_ Corporation. ‘S1: A proprietorship may have several employees. ‘$2: A manufacturing business can be organized by a sole proprietor. Which statement is correct? A 31 C. Both S1 and $2. B. $2. D_ Neither S1 nor $2. This means that the shareholders are liable only up to the extent of their investment in the business: A. Personal involvement. C. Continuance of operations. B. Limited liability. D Limited powers. ). The following are similarities between a corporation and a partnership. Select the exception: A. Ajuridical personality separate and distinct from the owners. B. Can be organized only where there is a law organizing its organization. C. Composed of an aggregate of individuals. D. Governed primarily by the Civil Code of the Philippines. . On a periodic basis, the accountant is required by owners to prepare reports containing financial information on the status and performance of the business. Information is obtained from the accounting records and the reports, known as are prepared.A Annual reports. C. Financial statements, B. Financial information. D_ Financial plans. . Who is primarily responsible for the financial statements? A. The accountant. B. The company’s auditor. C. The Philippine SEC. D. Company's management. . This is the branch of accounting that is concemed primarily with the preparation of general-purpose f i nancial statements: ‘A. Financial accounting. B. Managerial accounting. C. Government accounting, D. Tax accounting. }. This is the branch of accounting that is concerned primarily with the provision of information for internal users: A. Financial accounting. C. Government accounting. B. Managerial accounting, D_ Tax accounting. . This is the traditional service rendered by CPAs in public practice: A Audits, C. Agreed-upon procedures. B. Reviews. D Compilation. . Tax services include: A Tax planning, C. Letter a only. B. Tax compliance. D Bothaandb.This involves providing services to clients on matters of accounting, finance, business policies, organization procedures, budgeting, product costing and the conduct of operations. A Assurance services. C. Audit services. B. Management consulting. D. Tax services. The following statements relate to the scope of practice of accountancy. Which one constitutes practice in commerce and industry? A. A person who holds, or is appointed to a position in an accounting professional group in goverment or in a government-owned and/or controlled corporation, where decision-making requires professional knowledge in the science of accounting.B. A person involved in decision-making requiring professional knowledge in the science of accounting, as well as the accounting aspects of f inance and taxation, or is employed in a position that requires a CPA. C. A person who is in an educational institution which involves teaching of accounting, auditing, management advisory services, accounting aspect of finance, business law, taxation, and other technically-related subjects. D_ A person who holds out himself or herself as one skilled in the knowledge, science and practice of accounting, and as someone qualif ied to render professional services as a CPA. 19. The following statements pertain to the CPA Board Examinations. Which statement is incorrect? A. Acandidate successfully passes the Board Exams if he/she obtains a general average of seventy-f ive percent (75%), with no grades lower than sixty-f ive percent (65%) in any given subject. B. In the event a candidate obtains the rating of seventy-f i ve percent (75%) and above in at least a majority of subjects as provided for in RA9298, he/she shall receive a conditional credit for the subjects failed. C. Acconditioned candidate shall take an examination in the remaining subjects within two years from the preceding examination. D. If the conditioned candidate fails to obtain at least a general average of seventy-five percent (75%) and a rating of at least sixty-f i ve percent (65%) in each of the subjects reexamined during the removal examinations, he/she shall be considered as failed in the entire examination. 20. The following candidates have received the results of their CPA Board Examinations taken October 2012: Candidate General Average Remarks A. no previous 94.57% Perfect scores in six subjects, exam taken. and one subject has a rating of 62% B. no previous 75.00% No subjects below 65% exam taken, C.only previous 79.67% This is C's removal examination for three (3) try was in subjects. These subjects were rated as May 2012 75%, 100% and 64%, respectively.21. 22. 23. 24, What are the rating conclusions on the above candidates? A B c A Conditional Passed Failed B. Failed Passed Conditional Cc. Conditional Passed Conditional D. Failed Passed Failed This is the body authorized by law to promulgate rules and regulations af fecting the practice of accountancy in the Philippines. A PRC. C. BOA. B. SEC. D. ACPAPP. Bookkeeping is: A. Less broad in scope than accounting. B. Broader in scope than accounting. C. The same as accounting. D. Not related to accounting. A profession is distinguished by certain characteristics including |. Mastery of a particular intellectual skill, acquired by training and education. Il. Adherence by its members to a common code of values and conduct established by its administrating body, including maintaining an outlook which is essentially objective. Ill, Acceptance of a duty to society as a whole (usually in return for restrictions in use of a litle or in the granting of a qualif i cation). A I,land ll C. Ill only. B. land Il only. D. Iland Ill only. This refers to those persons who hold a valid certif icate issued by the Board of Accountancy (i.e., Certif ied Public Accountants), whether they be in public practice, (including a sole proprietorship or partnership), industry, commerce, the public sector, or education. A. Professional accountant. B. Professional accountant in public practice. C. Senior accounting practitioner.D. Audit associate. 25. The Board of Accountancy shall consist of a total of: A. Seven (7) persons - one Chairman, six members, all of whom are appointed by the President of the Philippines; the vice-chairman is elected from among the members. B. Eight (8) persons - one chairman, one vice-chairman, six members, all of whom are appointed by the President of the Philippines. C. Seven (7) persons - one Chairman, six members, all of whom are appointed by the Commissioner of the Professional Regulation Commission, from a list of recommendees. D. Six (6) persons - all of whom are appointed by the President of the Philippines. The chairman and the vice-chairman are elected from among the members of the Board.