1) Why is Accounting often referred to as the language of business?
Accounting is often referred to as the language of business because
accounting is relevant in all walks of life, and it is absolutely
essential in the world of business. It is the system that measures
business activities, processes that information into reports and
communicates the results to decision-makers. And accounting
quantifies business communication.
2) What is globalization? To your mind, what benefits will it bring you?
Globalization allows companies to find lower-cost ways to produce
their products. It also increases global competition, which drives
prices down and creates a larger variety of choices for consumers.
Lowered costs help people in both developing and already-developed
countries live better on less money. The benefits it will gave me is
that I can buy goods or products in a lower price with a better
qualities, especially to us students who is budgeting our daily
allowance, it is more convenient to us.
3) To your mind, why is business ethics important? Cite some ethical
dilemmas.
It’s important for organizations to operate with good business ethics
to avoid legal and regulatory problems. However, it’s also vital to
exhibit strong ethical behavior to maintain a positive reputation,
both with the public and employees. When an organization enjoys a
good reputation in the marketplace, attracts and retains a strong
customer base, and maintains a talented workforce, it often sees a
payoff in steady or increased revenues. Most people want to do
business with a company that operates fairly with others. Just as
negative press can drive away customers, positive press can draw in
new customer. Some examples of ethical dilemma include: Taking
credit for others’ work. Offering a client a worse product for your
own profit. And, utilizing inside knowledge for your own profit.
4) What are three forms of business organization? Define each briefly.
The three forms of business organization are the sole
proprietorship, partnership, and corporation. Sole proprietorship
is the business organization that has a single owner called
proprietor who generally is also the manager. In this business
organization the owner receives all profits, absorbs all losses and is
solely responsible for all debts of the business. Partnership is a
business owned and operated by two or more persons who bind
themselves to contribute money, property, or industry to a common
fund with the intention of dividing the profits among themselves.
Corporation is a business owned by its stockholders. It is an
artificial being created by operation of law, having the rights of
succession and the powers attributes and properties expressly
authorized by law or incident to its existence.
5) What are MSMEs? What purposes does it serve for economic
development?
MSMEs are the Micro, Small and Medium Enterprises. In terms of
economic output, MSMEs account for only 32%. Then, 68% of the
economic's total output can be attributed to the largest 0.4% of
Philippine enterprises, or 3,023 out of a total 777,687 firms
ccounted in 2010. But MSMEs hold the key to our economic
progress, the challenge lies in being able to increase productivity of
the MSMEs; also, there’s a need to further increase their number
and in the process help create more jobs.
6) What are the types of business? Distinguish them.
The types of business are services, trader, manufacturer, raw
materials, infrastructure, financial, and insurance. In services they
are hiring skilled staff and selling their time. Trader buying a range
of raw materials and manufactured goods and consolidating them,
making them available for sale in locations near their customers or
online for delivery. Manufacturer they taking raw materials and
using equipment and staff to convert them into finished goods. Raw
materials they are buying blocks of land and using them to provide
raw materials. Infrastructure buying and operating assets
(typically large assets); selling occupancy often in combination with
services. Financial they accepting cash from depositors and paying
them interest. Insurance they collecting cash from many
customers; investing the money to pay the losses experienced by a
few customers.
7) Give three definitions of accounting.
Accounting is a service activity. It’s function is to provide
quantitative information primarily financial in nature, about
economic entities that is intended to be useful in making economic
decisions. Accounting is an information system that measures,
processes and communicate financial information about an
economic entity. Accounting is the art of recording, classifying and
summarizing in a significant manner and in terms of money,
transactions, and events which are, in part at least, of a financial
character, and interpreting the results thereof.
8) Enumerate and distinguish the four phases of accounting.
The first phase of accounting is recording which can also be called
bookkeeping. During this phase, any financial transactions that
have taken place over the financial period, whatever time frame that
may be, must be chronologically recorded in a systematical way.
The accounting period can either be each month, quarterly or at the
end of every year. The correct books and databases must also be
used.
The second phases of accounting is classifying, which means that
all financial items and transactions must be sorted, organized and
grouped under certain names, categories and account depending on
the nature of the transaction for example, travel expenses.
The third phrase is summarizing means that all data has to be
summarized at the end. It is essential that this summarized data is
easy to understand for people who work within the accounting
department and for people who are not, as these files may be read
by people from all departments within the company. Visual aids
such as charts and graphs may also be used alongside the data
presented.
The final stage of accounting is interpreting which is where people
look at the data that has been recorded, classified and summarized
and they interpret that data. By doing this, the people examining
the data will be able to reach informed decisions about the financial
status of a company. This data will also be used to come up with
future financial plans for the business.
9) Why has a recording system, the double-entry, devised in medieval times
lasted for so long?
There are two main reasons why a recording system devised in
medieval times has lasted for so long: It provides an accurate
record of what has happened to a business over a given period of
time. Information extracted from the system can help the owner or
the manager to operate the business much more effectively. In
essence, the system provides the answers to three basic questions
that both owners and managers want to know.
10) Discuss the criteria for general acceptance of an accounting principle.
The general acceptance of the accounting principles or practices
depends on how well they meet the following three criteria. 3 main
criteria of GAAP are;
Relevance
A principle is relevant to the extent that it results in
information that is meaningful and useful to the users of the
accounting information.
Objectivity
Objectivity connotes impartiality and trustworthiness. A
principle is objective to the extent that the accounting information
is not influenced by personal bias or judgment of those who provide
it. It also implies verifiability, which means that there is some way
of ascertaining the correctness of the information reported.
Feasibility
A principle is feasible to the extent that it can be implemented
without much complexity or cost.
These criteria often conflict with each other, e.g., information
about the value of a new product to the inventor is indeed relevant.
Still, the best estimate of the value of a new product made by the
management is highly subjective.
11) What does the term generally accepted accounting principles mean?
Generally Accepted Accounting Principles may be defined as
those rules of action or conduct in accounting practice. When they
prove useful, they become accepted principles of accounting.
GAPP’s complete form is Generally Accepted Accounting Principles.
According to the American Institute of Certified Public Accountants
(AICPA), the principles with substantial authoritative support
become a part of the GAAP (Generally Accepted Accounting
Principles).
12) What is meant by stable monetary unit? Is this assumption realistic? Why
is it used in accounting?
The stable monetary unit concept assumes that the value of the
dollar is stable over time. This concept essentially allows
accountants to disregard the effect of inflation -- a decrease, in
terms of real goods, of what a dollar can purchase. Because of this
assumption, past financial statements are usually not updated even
if the value of money substantially changes. The concept is
generally a practical necessity, even though the assumption can
present some serious challenges if the currency is either deflating or
inflating quickly. Though the stable monetary unit assumption
makes the process of accounting more manageable, it can
sometimes present problems. If the value of money rapidly changes
due to market conditions or the effects of policy, a business’s
financial statements may be less useful for comparison with prior
records. If the values of accounts or past statements are not
subsequently adjusted to address the inflation or deflation, the
accounting record may not accurately represent a business’s
financial performance. This issue presents a link between day-to-
day accounting practice and broader market trends or government
policy.
13) What is the periodicity concept? Why is it important for business entities
to provide periodic information?
The periodicity assumption states that an organization can report
its financial results within certain designated periods of time. This
typically means that an entity consistently reports its results and
cash flows on a monthly, quarterly, or annual basis. These time
periods are kept the same over time, for the sake of comparability.
For example, if the reporting period for the current year is set at
calendar months, then the same periods should be used in the next
year, so that the results of the two years can compared on a month-
to-month basis. The periodicity assumption is important to
financial accounting because it allows businesses to show current
performance to investors and creditors for shorter periods of time.
Investors and creditors want the most current information possible
to base their financial decisions on.
14) What is materiality?
Materiality Principle or materiality concept is the accounting
principle that concern about the relevance of information, and the
size and nature of transactions that report in the financial
statements.
Fill in the Blanks
1. Accounting is a process of recording, measuring, analyzing, classifying,
and reporting of financial information to the stakeholders of the
businesses.
2. An activity carried out by a business to provide goods and services in
exchange for money is known as a Accounting.
3. Only business activities that can be measured in dollars and cents are
recorded. This is in accordance with the Stable Monetary Unit concept.
4. Personal financial activities of the owner of a business are not recorded
in the books of the business. This complies with the concept.
5. Transactions are recorded based on reliable and verifiable information.
This is in accordance with the Objectivity concept.
6. Transactions should be recorded in the accounts at their original cost
shown in the source documents. This practice complies with the
Historical Cost concept.
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