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Accounting Essentials
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Accounting Essentials
Accounting Essentials
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1
Question
What is the primary purpose of accounting?
Answer
Recording, classifying, summarizing financial transactions and events.
2
Question
Why is accounting considered both an art and a science?
Answer
Art: requires skill and judgment; Science: based on body of knowledge.
3
Question
Why are only transactions with financial character recorded?
Answer
They involve monetary value and can be assigned amounts.
4
Question
What does interpreting financial data involve?
Answer
Understanding what the figures mean for users.
5
Question
How is accounting a process?
Answer
It follows steps: data collection, recording, classification, summarization, reporting.
6
Question
What does the 'art' in accounting refer to?
Answer
The skillful application of techniques and creative judgment.
7
Question
What kind of information does accounting primarily deal with?
Answer
Financial transactions and data.
8
Question
How is accounting recognized as an information system?
Answer
It collects, processes, and communicates financial data.
9
Question
Who is Luca Pacioli and what was his contribution?
Answer
Father of accounting; wrote a book on mathematics that included double entry system.
10
Question
What is the double entry system?
Answer
A universally accepted accounting method where each transaction affects at least two accounts.
11
Question
Who are internal users of accounting information?
Answer
Owners, management, employees.
12
Question
How does management use accounting information?
Answer
For planning, controlling, evaluating performance, and decision making.
13
Question
What is the primary concern of owners using accounting info?
Answer
Profitability and ability to pay dividends.
14
Question
What decisions do investors make based on accounting info?
Answer
Risk and return related investment decisions.
15
Question
What is the normal balance of an asset account?
Answer
Debit side.
16
Question
List three current assets.
Answer
Cash, accounts receivable, inventory.
17
Question
What are liability accounts?
Answer
Debts owed by a business.
18
Question
What is the typical balance of a liability account?
Answer
Credit side.
19
Question
Name two current liabilities.
Answer
Accounts payable, salaries payable.
20
Question
What does equity represent?
Answer
Owner's interest in assets after liabilities.
21
Question
What decreases owners’ capital?
Answer
Withdrawals and expenses.
22
Question
What is the primary purpose of accounting?
Answer
To record, classify, summarize, and interpret financial transactions for decision-making.
23
Question
Why is accounting both an art and a science?
Answer
It combines skillful judgment (art) with systematic methods (science) to report financial info.
24
Question
What are the main phases of accounting?
Answer
Recording, classifying, summarizing, and interpreting financial data.
25
Question
Why record only transactions with financial character?
Answer
They involve monetary value and can be quantified and verified.
26
Question
What does interpreting financial data entail?
Answer
Analyzing what the figures reveal about the financial position and performance.
27
Question
How is accounting a process?
Answer
It follows sequential steps: data collection, recording, classification, summarization, and reporting.
28
Question
What is the 'art' in accounting?
Answer
Applying skill, judgment, and creativity in preparing and analyzing financial info.
29
Question
Is accounting an end or a means?
Answer
It is a means to discover, record, and communicate financial results.
30
Question
What information does accounting primarily handle?
Answer
Financial transactions and related data about assets, liabilities, and owners’ equity.