FDNACCT 02 · Concepts and Principles
Conventions
Amounts are Philippine pesos (₱). Enter numeric answers without a currency symbol; commas are optional. Use accrual accounting, periodic inventory, prepaid expenses under the asset method, unearned revenue under the liability method, straight-line depreciation, and the allowance method unless a question states otherwise. Interest uses a 360-day year or months/12. Follow the course cash-flow convention: interest/dividends received are investing, interest/dividends paid are financing. Each Practice Lab table has one highlighted blank. Questions are independent; use only the facts given in that question.
Questions
01Identify the assumption: maintain accounting records for the business separately from the owner.
Problem
The owner has a personal bank account as well as a business bank account. The records are kept separately, and only business transactions enter business accounts. Identify the assumption.
02Identify the characteristic: financial information is available in time to influence a decision.
Problem
The same information reaches a decision-maker either before or after the decision is made. Identify the characteristic concerned with availability in time to affect the decision.
03Identify the principle: provide policies and facts needed to interpret financial statements.
Problem
Financial reports include policies and explanatory facts needed by readers to interpret the amounts. Identify the principle.
04Identify the balance created by a completed service that remains unpaid.
Problem
All amounts are Philippine pesos (₱). A business has completed a service, but the customer has not paid. It uses accrual accounting. Identify the type of balance created for the unpaid amount.
05A laundry shop earned ₱60,000 in paid services and ₱37,000 on credit. It received ₱32,000 for future work. Enter earned revenue.
Problem
All amounts are Philippine pesos (₱). Use accrual accounting. Owner contributions and drawings are equity transactions, not income or expenses. A laundry shop collects 60,000 for services performed this month and has 37,000 of uncollected charges for services performed this month. Customers also pay 32,000 in advance for work that has not been performed.
06Name the other fundamental quality of useful information besides relevance.
Problem
Financial information is relevant. Name the second fundamental quality it also needs to be useful, rather than an enhancing quality.