Accounting Terms
This form of business organizations provides intangible products and offers professional expertise.
Service
Auditing refers to the process of inspecting and verifying financial statements.
True
Under the double-entry system, total debits is always equal to the total ____ .
credits
Saffron and Anya invested Php 500,000 cash to start a company. What type of transaction is being described?
Source of Assets
This type of transaction is when one claim account increases while another decreases.
Exchange of Claims
Creditors and investors are both considered external users of financial statements.
True
Accounts Payable is classified under the account title ____ .
Liabilities
Ginger needs Php100,000 to start a firm but only has Php50,000 cash savings. She asks her friend Gabbie if she is willing to invest her Php50,000 and become part owner. What form of business organization is being described?
Partnership
The amount due to creditors for goods or services bought on credit.
Accounts Payable
In a sole proprietorship, the owner and the business exist as separate legal entities.
False (Sole proprietors have unlimited liability and are legally responsible for the debts of the business.)
The accounting book where transactional data is organized into assets, liabilities, revenues, expenses, and owner’s equity is called the ____ .
Ledger
Bianca paid two months worth of rent in advance. If rent costs Php10,000 per month, what are the amounts entered for debit and credit respectively?
Debit: Prepaid Rent 20,000
Credit: Cash 20,000
This accounting principle states that in the case in which assets that are immaterial to make a difference in financial statements, the company should instead record it as an expense.
The accrual accounting principle states that revenues are recorded only when payment is received.
False (Revenue should be recognized when earned regardless of collection.)
The system by which all business transactions are recorded for the financial records is called ____ .
Journalizing
Sophia collected receivables amounting to P20,000. What type of transaction is being described?
Exchange of Assets
This accounting book organizes journal entries into specific accounts such as cash, equipment, and capital.
General Ledger
In the double-entry method, the amount entered as debits should always be less than the amount entered as credits.
False (The amount entered as debits should always be equal to the amount entered as credits.)
External auditing is the examination of financial statements by ____ .
an independent party
Sasha bought equipment worth Php 150,000 by paying half in cash and issuing a note. What are the amounts entered for debit and credit respectively?
Debit: Equipment 150,000
Credit: Cash 75,000; Notes Payable 75,000