AF-Activity 02 LM01-CP01

Which of the following does not properly describe accounting?

• It is a process by which useful information is generated.

• It is a social science.

• It requires the application of creative skills and judgment.

• It is often required to as the 'language of the soul'.

Which of the following best states the basic purpose of accounting?

• To identify shareholders

• To determine compliance with tax laws

• To provide quantitative information in order to help users make decisions

• To disclose the market value of the firm

Which of the following is considered an internal user of financial information?

• Rank and file employees of the reporting entity

• Stockholders of the entity who are not directly involved in managing the entity

• Lenders and the other creditors

• The entity's management

This type of business organization is created by a contractual agreement between two or more individuals.

• Sole proprietorship

• Partnership

• Corporation

• Cooperative

A business organization with assets of P3 million or less and employees of not greater than 9 workers

• Big

• Medium

• Small

• Micro

This concept requires the preparation of financial statements at least annually.

• Periodicity

• Materiality

• Accrual basis

• Separate entity

Under the accrual basis of accounting, a business records a sale

• When the sale occurs

• When the sale price is collected

• At the point in time when (a) and (b) above are satisfied

• A or B, as an accounting policy choice

Under this concept, amounts in the financial statements are stated in Philippine pesos and changes in the purchasing power of the Philippine peso due to inflation are generally ignored.

• Prudence

• Stable monetary unit

• Materiality

• Ignoring concept

When making judgments and estimates under conditions of uncertainty, the accountant chooses the potentially unfavorable outcome over the favorable ones. This concept refers to

• Separate entity

• Prudence/Conservatism

• Going concern

• Reporting period

Which of the following statements is incorrect?

• The basic purpose of accounting is to provide information that is useful in making economic decisions.

• Although bookkeeping and accounting are interrelated, they are not the same.

• Accounting is often referred to as the 'language of business' because it is fundamental to the communication of financial information.

• Amatino Manucci is the father of modern accounting.