Elitestudyvault stuvia
,Elitestudyvault stuvia
, Chapter 1
Overview of Accounting
Chapter 1: Theory of Accounts Reviewer
Definition of Accounting
1. Accounting has been given various definitions, which of the following is not one of those
definitions
a. Accounting is a service activity. Its function is to provide quantitative information, primarily
financial in nature, about economic entities that is intended to be useful in making
economic decisions.
b. 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 of at least, of a financial
character and interpreting the results thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating evidence
regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria and communicating the
results to interested users.
d. Accounting is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decisions by users of information.
2. It is the first process used in accounting. It refers to the identification of events as to whether
they are recognized or not in the financial statements.
a. Identifying b. Measuring c. Communicating d. Auditing
3. The following statements correctly refer to the accounting process.
I. Measuring is the accounting process of analyzing business activities as to whether or not
they will be recognized in the books.
II. Recognition refers to the process of including the effects of an event in the totals of the
statement of financial position or the statement of profit or loss and other comprehensive
income through memo entries.
III. Disclosure of events in the notes to financial statement without including in the totals of
the statement of financial position or statement of profit or loss and other comprehensive
income is not an application of the recognition principle.
IV. An accountable event is an event that has an effect on the assets, liabilities or equity of an
entity and its effect can be measured reliably.
V. Sociological and psychological matters are within the scope of accounting.
a. I, II, III, IV, V b. I, II, III, IV c. IV d. III, IV
Types of Events
4. These events involve changes in the economic resources or obligations of entities involving
other entities but do not involve transfers of resources or obligations
a. External events c. External events other than transfers
b. Non-reciprocal transfers d. Internal events
5. Events involving an entity and an external party.
a. External events c. External events other than transfers
b. Non-reciprocal transfers d. Internal events
6. Events in which an entity transfers (or receives) economic resources to (from) another entity
without directly receiving (or giving) value in exchange.
a. External events c. External events other than transfers
b. Non-reciprocal transfers d. Internal events
Elitestudyvault stuvia
, 7. These events result to a sudden or unanticipated loss from fortuitous events.
a. Internal events c. External events other than transfers
b. Non-reciprocal transfers d. Casualty
8. Which of the following statements is true?
I. Loss from theft should be classified as a nonreciprocal transfer
II. Internal events are changes in economic resources by actions of other entities that do not
involve transfers of enterprise resources and obligations
III. Nonreciprocal transfers involve the transfer of resources in only one direction, either from
an entity to other entities or from other entities to the entity.
IV. Internal events are sudden, substantial, unanticipated reductions in enterprise resources
not caused by other entities
V. Fire, earthquake and flood are examples of accountable events classified as internal
events.
a. I, II, III, V b. I, III, V c. II, III, IV, V d. I, III, IV, V
9. All of the following are events considered as exchange or reciprocal transfer, except
a. purchase of investment in equity securities
b. sale of equipment for non-interest bearing note
c. subscription on the entity’s own equity instrument
d. exchange of a note payable for an account payable
e. borrowing of money from a bank
10. All of the following are events considered as nonreciprocal transfer, except
a. declaration of cash dividends c. payment of accounts payable
b. declaration of stock dividends d. imposition of fines
11. All of the following are events considered as external events other than transfers, except
a. obsolescence c. imposition of fines
b. inflation d. vandalism
12. All of the following are events considered as internal events, except
a. Transfer of goods from work-in-process to finished goods inventory
b. flood, earthquake, fire and other “Acts of God”
c. transformation of biological assets from immature to mature
d. vandalism committed by the entity’s employees
13. Which of the following events is considered an internal event?
a. sale of inventory on account
b. provision of capital by owners
c. borrowing of money
d. conversion of raw materials into finished goods
14. Which of the following events is considered an external event?
a. production c. payment of taxes
b. casualty loss d. growth of biological assets
15. Which of the following events is considered an internal event?
a. theft c. vandalism
b. contributions by owners d. degeneration of biological assets
16. Which of the following correctly relates to accountable events?
Elitestudyvault stuvia
,Elitestudyvault stuvia
, Chapter 1
Overview of Accounting
Chapter 1: Theory of Accounts Reviewer
Definition of Accounting
1. Accounting has been given various definitions, which of the following is not one of those
definitions
a. Accounting is a service activity. Its function is to provide quantitative information, primarily
financial in nature, about economic entities that is intended to be useful in making
economic decisions.
b. 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 of at least, of a financial
character and interpreting the results thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating evidence
regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria and communicating the
results to interested users.
d. Accounting is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decisions by users of information.
2. It is the first process used in accounting. It refers to the identification of events as to whether
they are recognized or not in the financial statements.
a. Identifying b. Measuring c. Communicating d. Auditing
3. The following statements correctly refer to the accounting process.
I. Measuring is the accounting process of analyzing business activities as to whether or not
they will be recognized in the books.
II. Recognition refers to the process of including the effects of an event in the totals of the
statement of financial position or the statement of profit or loss and other comprehensive
income through memo entries.
III. Disclosure of events in the notes to financial statement without including in the totals of
the statement of financial position or statement of profit or loss and other comprehensive
income is not an application of the recognition principle.
IV. An accountable event is an event that has an effect on the assets, liabilities or equity of an
entity and its effect can be measured reliably.
V. Sociological and psychological matters are within the scope of accounting.
a. I, II, III, IV, V b. I, II, III, IV c. IV d. III, IV
Types of Events
4. These events involve changes in the economic resources or obligations of entities involving
other entities but do not involve transfers of resources or obligations
a. External events c. External events other than transfers
b. Non-reciprocal transfers d. Internal events
5. Events involving an entity and an external party.
a. External events c. External events other than transfers
b. Non-reciprocal transfers d. Internal events
6. Events in which an entity transfers (or receives) economic resources to (from) another entity
without directly receiving (or giving) value in exchange.
a. External events c. External events other than transfers
b. Non-reciprocal transfers d. Internal events
Elitestudyvault stuvia
, 7. These events result to a sudden or unanticipated loss from fortuitous events.
a. Internal events c. External events other than transfers
b. Non-reciprocal transfers d. Casualty
8. Which of the following statements is true?
I. Loss from theft should be classified as a nonreciprocal transfer
II. Internal events are changes in economic resources by actions of other entities that do not
involve transfers of enterprise resources and obligations
III. Nonreciprocal transfers involve the transfer of resources in only one direction, either from
an entity to other entities or from other entities to the entity.
IV. Internal events are sudden, substantial, unanticipated reductions in enterprise resources
not caused by other entities
V. Fire, earthquake and flood are examples of accountable events classified as internal
events.
a. I, II, III, V b. I, III, V c. II, III, IV, V d. I, III, IV, V
9. All of the following are events considered as exchange or reciprocal transfer, except
a. purchase of investment in equity securities
b. sale of equipment for non-interest bearing note
c. subscription on the entity’s own equity instrument
d. exchange of a note payable for an account payable
e. borrowing of money from a bank
10. All of the following are events considered as nonreciprocal transfer, except
a. declaration of cash dividends c. payment of accounts payable
b. declaration of stock dividends d. imposition of fines
11. All of the following are events considered as external events other than transfers, except
a. obsolescence c. imposition of fines
b. inflation d. vandalism
12. All of the following are events considered as internal events, except
a. Transfer of goods from work-in-process to finished goods inventory
b. flood, earthquake, fire and other “Acts of God”
c. transformation of biological assets from immature to mature
d. vandalism committed by the entity’s employees
13. Which of the following events is considered an internal event?
a. sale of inventory on account
b. provision of capital by owners
c. borrowing of money
d. conversion of raw materials into finished goods
14. Which of the following events is considered an external event?
a. production c. payment of taxes
b. casualty loss d. growth of biological assets
15. Which of the following events is considered an internal event?
a. theft c. vandalism
b. contributions by owners d. degeneration of biological assets
16. Which of the following correctly relates to accountable events?
Elitestudyvault stuvia
