1. Define accounting.
Answer: It is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities. 2. Describe accounting as an information system
Answer: Accounting is actually an information system that measures business activities, processes information into reports and communicates the reports to decision makers. 3. What are the three forms of business organizations? Explain each. Answer: a. Single or sole proprietorship – is a business owned by only an individual called the proprietor. It is the form of business easiest to organize since there are only minimal requirements to follow. b. Partnership – is an association of two or more persons who bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves. c. Corporation – is an artificial being created by operation of law having the rights of succession and the powers and attributes expressly authorized by law or incident to its existence.
4. What are the three types of business as to operation? Describe each. Answer: a. Service business – this business renders services to customers or clients for a fee. b. Merchandising business or trading – this kind of business buys goods or commodities and sells them at profit. c. Manufacturing business – this type makes finished goods from raw materials or unassembled parts.
5. Explain Generally Accepted Accounting Principles (GAAP). Mention at least five Generally Accepted Accounting Principles and explain each. Answer: Generally Accepted Accounting Principles encompasses the conventions, rules, procedures, practice and standards followed in the accumulation, preparation and presentation of accounting data in the financial statements.
* Business entity Concept – it is treated as separate and distinct from its owner/s and from other business units. * Going concern or continuity assumption – this assumes that unless there is evidence to the contrary, the business entity will continue to operate for an indefinite period. * Time period assumption – this assumption requires that the indefinite life of the business be divided into time periods or accounting periods for the purpose of preparing financial reports on the performance and financial position of the business. * Unit of measurement assumption – this specifies that accounting should measure and report the results of a business’ economic activities in terms of a monetary unit such as the Philippine Peso. * Accrual basis – it requires that revenue or income should be recognized when earned regardless of when incurred regardless of when payment is made.
6. What is meant by business entity concept?
Answer: It is treated as separate and distinct from its owner/s and from other business units. This accounting concept is important because it limits the economic data in the accounting system to data related to the activities of the business.
7. Differentiate accounting from bookkeeping.
Answer: Accounting is the art of recording, classifying and summarizing, in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof while bookkeeping is the process of systematically maintaining a record of all business transactions. 8. What are the specialized field in accounting? Explain each. Answer: A. Public Accounting – Accounting and their staff who render services for a fee are said to be engaged in public accounting. An accountant may practice as an individual or as a member of an accounting firm. * Auditing – this involves the independent examination of financial statements for the purpose of expressing an opinion on the fairness of the said statements prepared by the company under audit. * Tax...
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