ACCOUNTING 1

LESSON 2

NAME: VHETTY MAY C. POSADAS

YR & SECTION: BSHM 2-A
DATE: April 28, 2022

Activity 2
( 20 points)

Instruction: list down your answers on the space provided for.

1. What are the two primary objectives of business?

 To generate profits and to properly manage its limited and scarce resources.

2. What are the three (3) forms of business organizations according to activity?
 Partnership, Corporation & Sole proprietorship

3. What are the five components of the financial statements

Investors
Creditors
Suppliers
Government
Public

Assignment 2
Essay: Write your answers brief and concise however you can use examples to answer the
questions.

1. What is the difference between a calendar year business and a fiscal year business? 10
points
 A calendar year is an accounting period that ends on December 31. If it does not end on
December 31, it is referred to as a fiscal year or a natural business year.

2. What are the three processes in accounting as enumerated by the American Accounting
Association?.10 points
 Accounting is the process of identifying, measuring and communicating economic
information to permit informed judgments and decisions by users of the information.
(American Accounting Association)
Assessment 2
Multiple Choice: Select the letter that best fits the question

1. Which of the following transaction is considered a business transaction that can be recorded
in the books?
a. Signing of an employment contract
b. Purchase of house and lot by the owner for family use
c. Sale of merchandise to a foreign company
d. Donation of a personal equipment by the owner

2. Which of the following branches of accounting deals with the application of accounting
standards in the financial statements?
a. Management accounting
b. Financial accounting
c. Auditing
d. Taxation

3. Which of the following components of the financial statements presents the items that
increase and decrease the capital of the owner?
a. Statement of profit and loss
b. Statement of changes in equity
c. Statement of financial position
d. Statement of cash flows

4. Which of the following users is not considered an external user of the financial statements?
a. Investors
b. Creditors
c. Management
d. Public

5. Which of the following situation does not describe the manifestation of the revenue
recognition principle?
a. Revenue is recorded in the books after a contractor has performed the renovation services
to a corporate client
b. Sales has been recorded in the books after receiving the contract deposit from the buyer.
c. Rental Income has been recorded in the books after the tenant has used the unit space
d. Goods are already delivered to the customer by a freight company.

B. Write True if the statement is correct; otherwise write False

TRUE 1.The Philippine Institute of Certified Public Accountants (PICPA) is the professional
organization of accountants in the country.

FALSE 2. The materiality constraint is manifested in a situation wherein mechanical tools in

maintaining an aircraft are recognized as expenses due to their small values relative to the
overall property assets.

FALSE 3. The users of the financial statements who decide whether or not they would put their
money in a business endeavor or in other forms of income-generating ventures are the lenders.
TRUE 4. The operations of a merchandising company include buying of raw materials,
conversion of the materials into finished goods, and selling the goods to the public.

FALSE 5. Cost accounting is focused on the recording of business transactions and on the
periodic preparation of the financial statements.

FALSE 6. Financial accounting is an area of study that discusses the accumulation of cost data
such as materials, labor and overhead and the accounting for costs and inventories.

FALSE 7. A corporation is a business owned by a single person.

FALSE 8. The government agency responsible for collecting taxes is the Securities and
Exchange Commission. (SEC)

FALSE 9. Accounting is a service activity and its function is to provide qualitative information
that is useful in decision making.

TRUE 10. Signing a contract to purchase several machines is an example of a business

transaction which can be recorded in the financial books.

FALSE 11. The government agency responsible for the registration of partnerships and
corporations is the Bangko Sentral ng Pilipinas (BSP)

FALSE 12. The financial statement component which shows the resources and the obligations
of the business is the statement of cash flows.

FALSE 13. An advance receipt of cash for the performance of future services is a transaction
where the revenue is to be recognized in the books.

FALSE 14. The financial statement component which shows the cash inflows and the cash
outflows in running a business is the statement of profit and loss.

FALSE 15. The government agency responsible for regulating bank operations is the Bureau of
Internal Revenue(BIR)