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FAR (Guide Question)

This document contains questions and answers about accounting concepts and tools. It discusses T-accounts, the accounting equation, journal entries, ledgers, financial statements, and cash flows. Key points covered include: - Debits represent increases in asset accounts, while credits represent increases in liability and equity accounts. - Journals record transactions chronologically while ledgers summarize changes to individual accounts. - The four basic financial statements are the income statement, statement of changes in equity, statement of financial position, and statement of cash flows. - The usual reporting period for a company's financial statements is one year.

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Fiona Ramirez Romero
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107 views3 pages

FAR (Guide Question)

This document contains questions and answers about accounting concepts and tools. It discusses T-accounts, the accounting equation, journal entries, ledgers, financial statements, and cash flows. Key points covered include: - Debits represent increases in asset accounts, while credits represent increases in liability and equity accounts. - Journals record transactions chronologically while ledgers summarize changes to individual accounts. - The four basic financial statements are the income statement, statement of changes in equity, statement of financial position, and statement of cash flows. - The usual reporting period for a company's financial statements is one year.

Uploaded by

Fiona Ramirez Romero
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Chapter 5:Guide Questions

1.What is the simplest form of analytical tool used to record changes taking place
in the each of the accounts representing the accounting value?
- T Account

3. The term debit means increase and credit means decrease. Do you agree with
this statement? Explain why or why not.
- No, because some accounts are increased on the debit side while other
accounts are increased on the credit side depending on its position in the
accounting equation: ASSET = LIABILITIES + OWNER’S EQUITY
 Assets- are on the left side or debit side, therefore increases on the debit
side and decreases on the credit side.
 Liabilities and owner’s equity- are on the right side or credit side, therefore
increases on the credit side and decreases on the debit side.

6. Identify the business papers supporting the following transactions:


A. Cash collected from a client - Official Receipt
B. Cash paid for rent- Cash or Check Voucher
C. Rendered service on account- Stament of Account
D. Received service from PLDT- Statement of Account

7. What is a journal and what is its use in business?


- Journal is where the transaction is formally recorded. It is very useful for
businesses, since we know that journal is a financial transaction that records all
account detailedly or specifically. It helps businesses to know easily all the
transaction so that it’ll transfer easily in ledger.

8. With the journal there is no need for the ledger. Do you agree? Why or why
not?
- No, we still need ledger. Because in journal, it provides a complete
recording of a transaction in chronological order while in ledger it shows in one
page all the changes(increases or decreases) that took place for a particular
account. We can’t determine the balance of the cash or the service income of a
business in the journal, in otherwise we still need to have a ledger.

12. What is a cross reference? Discuss the procedure.


- Cross Reference- facilitates the tracing of an entry to and from the journal
and the ledger.
The procedure of cross reference in a Posting Procedure:
 Insert the journal page number in the folio column or posting reference
column of the ledger.
 Insert the ledger account number in the folio column or posting reference of
the journal.

14.What is the relevance of a subsidiary ledger?


- Subsidiary ledger or customer’s card and creditor’s card keep track of each
customers account or each of suppliers account.

Chapter 4: Guide Questions


7. Sketches and paints incurred expense of P25,000, but only paid P20,000. How
much expenses should be recorded by the firm if you used the cash concept?
- P20,000

10. The owner’s capital is P50,000 at the beginning of the year and P45,000 at
the end of the year. Give 2 possible reasons in decreasing capital.
- Net Loss
- Drawings

12. What are the four basic financial statements prepaired in accounting. Explain
their uses.
 Income Statements- shows how wealth is produced by listing the revenues
earned and expenses incurred by the business.
 Capital Statement- shows why the net worth changed by listing the activities
that caused it to increase or decrease.
 Statement of Financial Position- shows how the wealth of the business
stands by enumerating the assets, liabilities and net worth of the business.
Used to achieve business objectives.
 Statement of Cash Flows- shows what happened to the cash by enumerating
the activities of cash received and cash used by the business.

13. What transaction comprise Operating activities? Investing activities?


Financing activities?
- Operating Activities- Cash received from customers, cash paid for expense
- Investing Activities- Acquisition and sale of assets
- Financing Activities- Loan borrowed and repaid money, cash contributed
and cash withdrawn by the owner

15. Describe the two forms of statement of financial position.


- Report Form, where all elements are in one column with the liabilities and
owner’s equity place after the assets, while Account Form following the positions
of the elements in the accounting equation, that is, assets on the left side with
liabilities and owner’s equity on the right side.

19. What is the usual reporting period of the company? Why is this relevant.
- The usual reporting period of the company is one year as provided in PAS.
It’s relevance is to know if they achieved the mission of their company. And to
know also the cumulative figures from the time the business started at the time
the financial position was made.

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