Accounting.pptx

1 – ACCOUNTING

1 – ANSWER: ACCOUNTING IS A SERVICE ACTIVITY. ITS FUNCTION IS TO PROVIDE QUANTITATIVE INFORMATION PRIMARILY FINANCIAL IN NATURE THAT IS INTENDED TO BE USEFUL IN MAKING ECONOMIC DECISIONS.

2 – LAW THAT REGULATES THE PRACTICE OF ACCOUNTANCY IN THE PHILIPPINES

2 – ANSWER: REPUBLIC ACT 9298 – PHILIPPINE ACCOUNTANCY ACT OF 2004

3 – BODY AUTHORIZED BY LAW TO PROMULGATE RULES AND REGULATIONS AFFECTING THE PRACTICE OF THE ACCOUNTANCY PROFESSION

3 – ANSWER: BOARD OF ACCOUNTANCY

4 – ANALYTICAL, TECHNICAL AND FORMAL COMPONENTS OF ACCOUNTING

4 – ANSWER: IDENTIFYING (ANALYTICAL), MEASURING (TECHNICAL), COMMUNICATING (FORMAL)

5 – INTERNAL AND EXTERNAL TRANSACTIONS

5 – ANSWER: EXTERNAL TRANSACTIONS – INVOLVE TWO ENTITIES DISTINGUISHABLE FROM EACH OTHER (SALE, TRANSFER, INVESTMENT, LOAN) INTERNAL TRANSACTIONS – TRANSACTIONS OTHER THAN EXTERNAL TRANSACTIONS (PRODUCTION LOSS, ACTS OF GOD, DEPARTMENTAL TRANSFER)

6 – FINANCIAL VS. MANAGEMENT ACCOUNTING

6 – ANSWER: MANAGEMENT – PROVIDES INFORMATION TO PEOPLE WITHIN AN ORGANIZATION FINANCIAL – COMPLIES WITH ACCOUNTING STANDARDS AND PROVIDES INFORMATION FOR STAKEHOLDERS OUTSIDE THE ORGANIZATION

7 – FOUR ASSUMPTIONS IN ACCOUNTING

7 – ANSWER: (1) ECONOMIC ENTITY ASSUMPTION, (2) MONETARY UNIT ASSUMPTION, (3) TIME PERIOD ASSUMPTION, (4) GOING CONCERN

8 – FOUR ACCOUNTING PRINCIPLES

8 – ANSWER: HISTORICAL COST, REVENUE RECOGNITION, MATCHING PRINCIPLE, DISCLOSURE

9 – FOUR ACCOUNTING CONSTRAINTS

9 – ANSWER: ESTIMATES & JUDGEMENTS, MATERIALITY, CONSISTENCY, CONSERVATISM

10 – FOUR EQUATIONS THAT SERVE AS FOUNDATION OF ACCOUNTING

10 – ANSWER: ENTITY THEORY (A=L+C), PROPRIETARY THEORY (A-L=C), RESIDUAL EQUITY THEORY (A-L-PS=CS), FUND THEORY (F=CI-CO)

11 – FOUR PRINCIPAL QUALITATIVE CHARACTERISTICS OF FINANCIAL REPORTING

11 – ANSWER: RELEVANCE, RELIABILITY, UNDERSTANDABILITY, COMPARABILITY

12 – THREE INGREDIENTS OF RELEVANCE

12 – ANSWER: PREDICTIVE VALUE, FEEDBACK/CONFIRMATORY VALUE, TIMELINESS

13 – FIVE INGREDIENTS OF RELIABILITY

13 – ANSWER: FAITHFUL REPRESENTATION, SUBSTANCE OVER FORM, NEUTRALITY, CONSERVATISM/PRUDENCE, COMPLETENES

14 – CAPITAL MAINTENANCE VS. TRANSACTION APPROACH

14 – ANSWER: CAPITAL MAINTENANCE - NET INCOME IS DEFINED AS THE DIFFERENCE BETWEEN THE NET ASSETS (ASSETS MINUS LIABILITIES) AT THE BEGINNING OF A PERIOD AND NET ASSETS AT THE END OF THE PERIOD, EXCLUDING OWNERS'CONTRIBUTIONS AND DISTRIBUTIONS DURING THE PERIOD. TRANSACTION APPROACH – NET INCOME IS CALCULATED BY ANALYZING THE EFFECTS OF REVENUE AND EXPENSE

15 – DEFINE OBLIGATION.

15 – ANSWER: A JURIDICAL NECESSITY TO GIVE, TO DO OR NOT TO DO.

16 – FIVE SOURCES OF OBLIGATION

16 – ANSWER: LAW, CONTRACTS, QUASI-CONTRACTS, DELICTS, QUASI DELICTS

17 – TWO KINDS OF QUASI-CONTRACTS

17 – ANSWER: NEGOTIORUM GESTIO, SOLUTIO INDEBITI

18 – EXPLAIN THE CONCEPT OF DETERMINATE AND GENERIC THINGS

18 – ANSWER: A THING IS DETERMINATE IF IT CAN BE PARTICULARLY DESIGNATED OR PHYSICALLY SEGREGATED FROM ALL OTHERS OF THE SAME CLASS WHY GENERIC THINGS CANNOT.

19 – OBLIGATIONS OF ONE OBLIGED TO GIVE A DETERMINATE THING

19 – ANSWER: EXERCISE THE RIGHT LEVEL OF DILIGENCE AND DELIVER THE THING, FRUITS, ACCESSIONS AND ACCESSORIES. [DTFA]

20 – REMEDIES OF THE CREDITOR IF THE DEBTOR FAILS TO PERFORM HIS OBLIGATION TO DELIVER A DETERMINATE THING

20 – ANSWER: 1) COMPEL THE DEBTOR TO MAKE THE DELIVERY AND 2) DEMAND DAMAGES FROM THE DEBTOR

21 – REMEDIES OF THE CREDITOR IF THE DEBTOR FAILS TO PERFORM HIS OBLIGATION TO DELIVER A GENERIC THING

21 – ANSWER: 1) HAVE THE OBLIGATION BE COMPLIED WITH AT THE EXPENSE OF THE DEBTOR AND 2) DEMAND DAMAGES FROM THE DEBTOR

22 – REMEDIES OF THE CREDITOR IF THE DEBTOR FAILS TO PERFORM HIS OBLIGATION IN OBLIGATIONS TO DO

22 – ANSWER: 1) HAVE THE OBLIGATION EXECUTED AT THE EXPENSE OF THE DEBTOR AND 2) DEMAND DAMAGES FROM THE DEBTOR

23 – REMEDIES OF THE CREDITOR IF THE DEBTOR PERFORMS THE OBLIGATION BUT DOES IT POORLY OR CONTRAVENES TO THE TENOR THEREOF IN OBLIGATIONS TO DO

23 – ANSWER: 1) HAVE THE PERFORMANCE BE UNDONE AT THE DEBTOR’S EXPENSE AND 2) DEMAND DAMAGES FROM THE DEBTOR

24 – REMEDIES OF THE CREDITOR IF THE DEBTOR DOES WHAT HAS BEEN FORBIDDEN HIM

24 – ANSWER: 1) DEMAND THAT WHAT HAS BEEN DONE BE UNDONE AND 2) DEMAND DAMAGES FROM THE DEBTOR

25 – FOUR GROUNDS FOR LIABILITY TO PAY DAMAGES

25 – ANSWER: FRAUD, NEGLIGENCE, DELAY, CONTRAVENTION OF THE TENOR OF THE OBLIGATION [FNDC]

26 – SIX KINDS OF DAMAGES

26 – ANSWER: ACTUAL, MORAL, NOMINAL, TEMPERATE, LIQUIDATED, EXEMPLARY [MANTEL]

27 – TWO KINDS OF FRAUD IN OBTAINING CONSENT

27 – ANSWER: CAUSAL FRAUD (DOLO CAUSANTE) AND INCIDENTAL FRAUD (DOLO INCIDENTE)

28 – TWO KINDS OF OBLIGATION ACCORDING TO TIME OF COMMISION

28 – ANSWER: FUTURE AND PAST FRAUD

29 – THREE KINDS OF NEGLIGENCE

29 – ANSWER: CONTRACTUAL (CULPA CONTRACTUAL), CIVIL (CULPA AQUILIANA), CRIMINAL (CULPA CRIMINAL)

30 – THREE KINDS OF DELAY

30 – ANSWER: MORA SOLVENDI, MORA ACCIPIENDI, COMPENSATIO MORAE

31 – TWO KINDS OF MORA SOLVENDI

31 – ANSWER: EX RE AND EX PERSONA

32 – FOUR REQUISITES OF DELAY

32 – ANSWER: 1) OBLIGATION IS DEMANDABLE AND LIQUIDATED, 2) DEBTOR DOES NOT PERFORM THE OBLIGATION, 3) CREDITOR DEMANDS THE PERFORMANCE EITHER JUDICIALLY OR EXTRAJUDICIALLY, 4) DEBTOR FAILS TO COMPLY WITH SUCH DEMAND

33 – FIVE CASES WHEN DELAY WILL EXIST EVEN WITHOUT DEMAND

33 – ANSWER: WHEN THE LAW SO PROVIDES, WHEN THE OBLIGATION EXPRESSLY SO DECLARES, WHEN TIME IS OF THE ESSENCE, WHEN DEMAND WOULD BE USELESS, IN RECIPROCAL OBLIGATIONS WHERE ONE OF THE PARTIES FULFILLS HIS OBLIGATION

34 – EFFECTS OF DEFAULT ON THE PART OF THE DEBTOR

34 – ANSWER: SHALL BE LIABLE FOR DAMAGES & SHALL BE LIABLE FOR ANY FORTUITOUS EVENT UNTIL DELIVERY (DETERMINATE THINGS)

35 – EFFECTS OF DELAY ON THE PART OF THE CREDITOR

35 – ANSWER: BEAR THE RISK OF LOSS AND THE EXPENSES FOR THE PRESERVATION OF THE THING & THE DEBTOR MAY RESORT TO THE CONSIGNATION OF THE THING DUE

36 – TAXATION

36 – ANSWER: TAXATION IS A MEANS BY WHICH GOVERNMENTS FINANCE THEIR EXPENDITURES BY IMPOSING CHARGES ON INDIVIDUALS AND CORPORATE ENTITIES.

37 – THREE INHERENT POWERS OF THE STATE

37 – ANSWER: POLICE POWER (FOR PUBLIC GOOD/WELFARE), POWER OF EMINENT DOMAIN (FOR PUBLIC USE), POWER OF TAXATION (FOR REVENUE)

38 – SIX INHERENT LIMITATIONS ON THE POWER OF TAXATION

38 – ANSWER: • TAX MUST BE LEVIED FOR PUBLIC PURPOSE • THE POWER OF TAXATION CANNOT BE DELEGATED • THE RULE AGAINST DIRECT DOUBLE TAXATION • GOVERNMENT INSTRUMENTALITIES AND AGENCIES WHICH THE GOVERNMENT EXERCISES SOVEREIGN POWERS ARE EXEMPT FROM TAX • THE POWER OF TAXATION IS LIMITED TO THE TERITTORIAL JURISDICTION OF THE TAXING STATE • THE TAX LAWS CANNOT APPLY TO THE PROPERTY OF FOREIGN GOVERNMENTS (INTERNATIONAL COMITY)

39 – FOUR CONSTITUTIONAL LIMITATIONS ON THE POWER OF TAXATION

39 – ANSWER: • NO LAW IMPAIRING THE OBLIGATIONS OF CONTRACTS WILL BE PASSED • NO PERSON CAN BE IMPRISONED FOR DEBT OR NON-PAYMENT OF A POLL TAX • THE RULE ON TAXATION MUST BE UNIFORM AND EQUITABLE • INSTITUTIONS AND PROPERTIES THAT SERVE RELIGIOUS OR CHARITABLE PURPOSES WILL BE EXEMPT FROM TAX

40 – THREE BASIC PRINCIPLES OF A SOUND TAX SYSTEM

40 – ANSWER: FISCAL ADEQUACY, THEORETICAL JUSTICE, ADMINISTRATIVE FEASIBILITY

41 – SIX ESSENTIAL CHARACTERISTICS OF TAX

41 – ANSWER: IT IS: A FORCED CONTRIBUTION, LEGISLATIVE IN NATURE, POPORTIONATE IN CHARACTER, PAYABLE IN MONEY, IMPOSED FOR THE PURPOSE OF RAISING REVENUE, TO BE USED FOR PUBLIC PURPOSE

42 – THREE CLASSIFICATION OF TAXES AS TO SUBJECT MATTER

42 – ANSWER: PERSONAL/CAPITATION/POLL TAX, PROPERTY TAX, EXCISE TAX

43 – TWO CLASSIFICATION OF TAXES AS TO WHO BEARS THE BURDEN

43 – ANSWER: DIRECT AND INDIRECT TAXES

44 – TWO CLASSIFICATIONS OF TAXES AS TO DETERMINATION OF AMOUNT

44 – ANSWER: SPECIFIC TAX. AD VALOREM TAX

45 – TWO CLASSIFICATIONS OF TAXES AS TO PURPOSE

45 – ANSWER: GENERAL AND SPECIAL TAXES

46 – THREE CLASSIFICATIONS OF TAXES AS TO PROPORTIONALITY

46 – ANSWER: PROGRESSIVE, REGRESSIVE, PROPORTIONAL

47 – THREE FORMS OF INCOME TAX PAYERS IN THE PHILIPPINES

47 – ANSWER: INDIVIDUALS, CORPORATIONS, PARTNERSHIPS OTHER THAN GENERAL PROFESSIONAL PARTNERSHIPS

48 – FIVE KINDS OF TAXABLE INDIVIDUALS

48 – ANSWER: RESIDENT CITIZEN, NON-RESIDENT CITIZEN, RESIDENT ALIEN, NON-RESIDENT ALIEN ENGAGED IN TRADE/BUSINESS IN THE PHILIPPINES, NON-RESIDENT ALIEN NOT ENGAGED IN TRADE/BUSINESS IN THE PHILIPPINES BUT WITH INCOME FROM WITHIN THE PHILIPPINES

49 – THREE KINDS OF TAXABLE CORPORATIONS

49 – ANSWER: DOMESTIC CORP., RESIDENT CORP., NONRESIDENT CORP. BUT WITH INCOME FROM WITHIN THE PHILIPPINES

50 – INDIVIDUAL TAXPAYERS TAXED ON INCOME FROM WITHIN THE PHILIPPINES

50 – ANSWER: RC, NRC, RA, NRA EIBWTP

51 – INDIVIDUAL TAXPAYERS TAXED ON INCOME FROM OUTSIDE THE PHILIPPINES

51 – ANSWER: RESIDENT CITIZEN

52 – TAXABLE INDIVIDUAL TAXED ON GROSS INCOME FROM WITHIN THE PHILIPPINES

52 – ANSWER: NON-RESIDENT ALIEN NOT ENGAGED IN BUSINESS IN THE PHILIPPINES BUT WITH AN ISOLATED INCOME FROM WITHIN THE PHILIPPINES

53 – TAXABLE CORPORATIONS TAXED ON NET INCOME FROM WITHIN THE PHILIPPINES

53 – ANSWER: DOMESTIC CORPORATION, RESIDENT CORPORATION

54 – TAXABLE CORPORATIONS TAXED ON NET INCOME FROM OUTSIDE THE PHILIPPINES

54 – ANSWER: DOMESTIC CORPORATION

55 – TAXABLE CORPORATIONS TAXED ON GROSS INCOME FROM WITHIN THE PHILIPPINES

55 – ANSWER: NON-RESIDENT CORPORATION

56 – HOW ARE TAXABLE PARNERSHIPS TAXED?

56 – ANSWER: SAME RULES AS CORPORATIONS

57 – CASH

57 – ANSWER: ANY ITEM THAT IS ACCEPTABLE BY BANK OR OTHER FINANCIAL INSTITUTION FOR DEPOSIT AT FACE VALUE. AN ITEM IS CONSIDERED CASH IF IT IS UNRESTRICTED AND IMMEDIATELY AVAILABLE FOR USE IN CURRENT OPERATION

58 – COMMON ITEMS THAT COMPRISE CASH

58 – ANSWER: COINS, CURRENCIES, CHECKS, BANK DRAFTS, MONEY ORDERS (THOSE THAT ARE ACCEPTABLE BY BANK FOR DEPOSIT); SAVINGS ACCOUNT, CHECKING ACCOUNT (CASH IN BANK THAT ARE NOT RESTRICTED AND AVAILABLE FOR USE IN OPERATIONS)

59 – MEASUREMENT OF CASH

59 – ANSWER: FACE VALUE

60 – MEASUREMENT OF CASH IN FOREIGN CURRENCY

60 – ANSWER: CURRENT EXCHANGE RATE

61 – CASH OF THE ENTITY WHEN IT IS HELD BY A FINANCIAL INSTITUTION IN BANKRUPTCY OR FINANCIAL DIFFICULTY

61 – ANSWER: DR. RECEIVABLE, LOSS CR. CASH (ENTRY TO WRITE DOWN ASSET TO ESTIMATED REALIZABLE VALUE)

62 – CASH EQUIVALENT

62 – ANSWER: EXCESS CASH IS INVESTED TO GAIN MAXIMUM BENEFIT FROM THE ASSET. THE INVESTMENT IS CONSIDERED A CASH EQUIVALENT IF ITS MATURITY PERIOD IS INITIALLY NO LONGER THAB THREE MONTHS

63 – RESTRICTED DEPOSITS IN FOREIGN INVESTMENT

63 – ANSWER: LONG TERM INVESTMENT

64 – OVERDRAFT

64 – ANSWER: THE CREDIT BALANCE IN THE CASH IN BANK ACCOUNT RESULTS FROM THE ISSUANCE OF CHECKS IN EXCESS OF THE DEPOSITS. OVERDRAFT IS NOT PERMITTED IN THE PHILIPPINES.

65 – ACCOUNTING TREATMENT FOR OVERDRAFT

65 – ANSWER: IF THERE IS ONLY ONE ACCOUNT IN THE BANK: MATERIAL (LIABILITY), IMMATERIAL (OFFSET AGAINST OTHER ACCOUNTS IN OTHER BANKS) IF THERE ARE MORE THAN ONE ACCOUNTS IN THE SAME BANK: OFFSET AGAINST THE OTHER ACCOUNTS IN THE SAME BANK

66 – BANK COMPENSATING BALANCE

66 – ANSWER: IF LEGALLY RESTRICTED – CURRENT/NONCURRENT ASSET DEPENDING ON RELATED LOAN “CASH HELD AS COMPENSATING BALANCE” IF NOT LEGALLY RESTRICTED OR SILENT - CASH

67 – STALE CHECKS

67 – ANSWER: IN BANKING PRACTICE, CHECKS BECOME STALE IF NOT ENCASHED WITHIN 6MONTHS FROM THE TIME OF ISSUANCE

68 – ACCOUNTING TREATMENT FOR STALE CHECKS

68 – ANSWER: MATERIAL – DR. CASH CR. ACCOUNTS PAYABLE IMMATERIAL – DR. CASH CR. MISCELLANEOUS INCOME

69– CASH SHORTAGE/OVERAGE

69 – ANSWER: CASHIER IS HELD RESPONSIBLE – DR. RECEIVABLE FROM CASHIER CR. CASH REAL CAUSE IS UNIDENTIFIABLE – DR. LOSS FROM CASH SHORTAGE CR. CASH

70 – IMPREST SYSTEM

70– ANSWER: SYSTEM OF CONTROL OF CASH WHICH REQUIRES THAT ALL CASH RECEIPTS SHOULD BE DEPOSITED INTACT AND ALL CASH DISBURSEMENT SHOULD BE MADE BY MEANS OF CHECK.

71 – PETTY CASH FUND UNDER IMPREST SYSTEM

71 – ANSWER: IN IMPREST SYSTEM, PAYMENT OF EXPENSES REQUIRES NO FORMAL ENTRIES. PETTY CASHIER GENERALLY REQUIRES A SIGNED PETTY CASH VOUCHER FOR SUCH PAYMENTS AND PREPARES MEMO ENTRY IN THE PETTY CASH JOURNAL. PETTY CASH DISBURSEMENT SHOULD BE REPLENISHED ONLY BY MEANS OF CHECK AND NOT FROM UNDEPOSITED COLLECTION

72 – IMPREST SYSTEM: ENTRY WHEN DISBURSING FROM THE PETTY CASH FUND,ENTRY TO REPLENISH PETTY CASH FUND, WHEN NO REPLENISHMENT IS MADE

72 – ANSWER: 1) NO ENTRY 2) DR. EXPENSES CR. CASH IN BANK 3) DR. EXPENSES CR. PETTY CASH FUND

73 – PETTY CASH FUND UNDER FLUCTUATING FUND SYSTEM

73 – ANSWER: UNDER FLUCTUATING FUND SYSTEM, CHECKS DRAWN TO REPLENISH THE FUND DO NOT NECESSARILY EQUAL THE PETTY CASH DISBURSEMENT. EXPENSES ARE IMMEDIATELY RECORDED AND PCF FLUCTUATES FROM TO TIME.

74 – FLUCTUATING FUND SYSTEM: ENTRY WHEN DISBURSING FROM THE PETTY CASH FUND, ENTRY TO REPLENISH PETTY CASH FUND, WHEN NO REPLENISHMENT IS MADE

74 – ANSWER: 1) DR. EXPENSES CR. PETTY CASH FUND 2) DR. PETTY CASH FUND CR. CASH IN BANK 3) NO ENTRY

75 – TWO KINDS OF FORTUITOUS EVENTS

75 – ANSWER: ACTS OF GOD (CASO FORTUITO) & ACTS OF MAN (FORCE MAJEURE)

76 – FOUR CASES WHERE THE OBLIGOR BECOMES LIABLE FOR FORTUITOUS EVENTS

76 – ANSWER: WHEN THE LAW EXPRESSLY SO PROVIDES, WHEN IT HAS BEEN AGREED UPON BY THE PARTIES, WHEN THE NATURE OF THE OBLIGATION REQUIRES THE ASSUMPTION OF RISK, WHEN THE DEBTOR IS IN LEGAL DELAY

77 – PRESUMPTIONS ON RECEIPT OF PRINCIPAL OR LATER INSTALLMENTS

77 – ANSWER: WHEN THE CREDITOR MAKES NO RESERVATION AS TO THE INTEREST OR PRIOR INSTALLMENTS, IT IS PRESUMED THAT THEY HAVE BEEN PAID

78 – THREE REMEDIES OF CREDITOR TO ENFORCE PAYMENT OF HIS CLAIMS AGAINST DEBTOR

78 – ANSWER: ACCION DIRECTA, ACCION SUBROGATORIA, ACCION PAULIANA

79 – THREE INSTANCES WHERE RIGHTS ARE NOT TRANSMISSIBLE

79 – ANSWER: IF THE LAW PROHIBITS TRANSMISSION, IF THE PARTIES AGREED AGAINST TRANSMISSION, IF THE RIGHT BY NATURE IS NOT TRANSMISSIBLE

80 – EIGHT PRIMARY CLASSIFICATIONS OF OBLIGATIONS UNDER THE CIVIL CODE

80 – ANSWER: PURE, CONDITIONAL, WITH A PERIOD, ALTERNATIVE, FACULTATIVE, JOINT, SOLIDARY, DIVISIBLE

81 – TWO TYPES OF CONDITION ACCORDING TO EFFECT ON DEMANDABILITY OF OBLIGATION

81 – ANSWER: SUSPENSIVE AND RESOLUTORY

82 – THREE TYPES OF CONDITION ACCORDING TO WHOSE WILL THE CONDITION DEPENDS UPON

82 – ANSWER: POTESTATIVE, CASUAL, MIXED

83 – POSSIBLE VS. IMPOSSIBLE CONDITION

83 – ANSWER: POSSIBLE – ONE THAT IS CAPABLE OF FULFILLMENT IN ITS NATURE AND BY LAW, IMPOSSIBLE – ONE THAT IS NOT

84 – POSITIVE VS. NEGATIVE CONDITION

84 – ANSWER: POSITIVE – SOMETHING HAS TO HAPPEN NEGATIVE – SOMETHING SHOULD NOT HAPPEN (BOTH WITHIN A PERIOD OF TIME)

85 – DIVISIBLE VS. INDIVISIBLE OBLIGATION

85 – ANSWER: DIVISIBLE – CAPABLE OF PARTIAL PERFORMANCE INDIVISIBLE – INCAPABLE OF PARTIAL PERFORMANCE

86 – EFFECT OF FULFILLMENT OF SUSPENSIVE CONDITION AND THE TWO EXCEPTIONS TO IT

86 – ANSWER: IT RETROACTS TO THE DAY OF THE CONSTITUTION OF THE OBLIGATION EXCEPT IN RECIPROCAL AND UNILATERAL OBLIGATIONS

87 – RIGHTS OF THE PARTIES (DEBTOR AND CREDITOR) BEFORE THE FULFILLMENT OF THE CONDITION

87 – ANSWER: CREDITOR – BRING APPROPRIATE ACTIONS FOR THE PRESERVATION OF HIS RIGHT DEBTOR – RECOVER WHAT HE HAS PAID BY MISTAKE

88 – EFFECT WHEN THE DEBTOR VOLUNTARILY PREVENTS THE FULFILLMENT OF THE CONDITION

88 – ANSWER: THE OBLIGATION BECOMES IMMEDIATELY DEMANDABLE

89 – AUDITING

89 – ANSWER: A SYSTEMATIC PROCESS OF OBJECTIVELY OBTAINING AND EVALUATING EVIDENCE REGARDING ASSERTIONS ABOUT ECONOMIC ACTIONS OR EVENTS TO ASCERTAIN THE DEGREE OF CORRESPONDENCE BETWEEN THESE ASSERTIONS AND ESTABLISHED CRITERIA AND COMMUNICATING THE RESULTS TO INTERESTED USERS

90 – ASSURANCE VS. NON-ASSURANCE ENGAGEMENTS

90 – ANSWER: THE OBJECTIVE OF ASSURANCE ENGAGEMENTS IS TO EXPRESS AN OPINION THAT ENHANCES THE DEGREE OF CONFIDENCE THAT INTENDED USERS CAN HAVE. NON-ASSURANCE ENGAGEMENTS ARE THOSE SERVICES PERFORMED BY CPAs WHICH DO NOT INVOLVE THE EXPRESSION OF AN OPINION

91 – ASSERTION-BASED VS. DIRECT REPORTING ENGAGEMENT

91 – ANSWER: ASSERTION-BASED – CLIENT PREPARES THE FS AND AUDITOR EXPRESSES AN OPINION REGARDING THE FS DIRECT REPORTING – THE CLIENT DOES NOT PREPARE THE FS, THE AUDITOR DOES IT OR OBTAINS A REPRESENTATION FROM A THIRD PARTY WHO DOES IT, AND EXPRESSES AN OPINIO REGARDING THE FS

92 – REASONABLE VS. LIMITED ASSURANCE ENGAGEMENT

92 – ANSWER: REASONABLE ASSURANCE – INDEPENDENT FINANCIAL STATEMENT AUDIT LIMITED ASSURANCE – REVIEW OF NONFINANCIAL PERFORMANCE, HUMAN RESOURCES, INTERNAL CONTROL

93 – THREE TYPES OF AUDIT

93 – ANSWER: EXTERNAL AUDIT, OPERATIONAL AUDIT, COMPLIANCE AUDIT

94 – THREE TYPES OF AUDITORS

94 – ANSWER: INTERNAL AUDITOR, EXTERNAL AUDITOR, GOVERNMENT AUDITOR

95 – FIVE ELEMENTS OF AN ASSURANCE ENGAGEMENT

95 – ANSWER: THREE PARTY RELATIONSHIP, APPROPRIATE SUBJECT MATTER, SUITABLE CRITERIA, SUFFICIENT APPROPRIATE EVIDENCE, WRITTEN ASSURANCE REPORT/OPINION

96 – FIVE FORMS OF APPROPRIATE SUBJECT MATTER

96 – ANSWER: FINANCIAL PERFORMANCE/CONDITIONS (FS), NON-FINANCIAL PERFORMANCE/CONDITIONS (EFFICIENCY AND EFFECTIVITY), PHYSICAL CHARACTERISTICS (CAPACITY OF FACILITY), SYSTEMS & PROCESSES (INTERNAL CONTROL & IT SYSTEM), BEHAVIOR (CORPORATE GOVERNANCE, HUMAN RESOURCE PRACTICES)

97 – FIVE CHARACTERISTICS OF SUITABLE CRITERIA

97 – ANSWER: RELEVANCE, COMPLETENESS, RELIABILITY, NEUTRALITY, UNDERSTANDABILITY (RRCUN)

98 – FIVE GENERALIZATIONS REGARDING THE RELIABILITY OF EVIDENCE

98 – ANSWER: EVIDENCE IS MORE RELIABLE WHEN: 1) OBTAINED FROM INDEPENDENT SOURCES; 2) RELATED CONTROLS ARE EFFECTIVE (IF GENERATED INTERNALLY); 3) DIRECTLY OBTAINED BY PRACTIONER THAN BY INFERENCE (OBSERVATION VS INQUIRY) 4) IN DOCUMENTARY FORM THAN ORAL 5) ORIGINAL DOCUMENTS THAN PHOTOCOPIES OR FASCIMILES

99 – FACTORS THAT LIMIT THE AUDITOR FROM PROVIDING ABSOLUTE ASSURANCE

99 – ANSWER: SAMPLING RISKS, HUMAN WEAKNESSES /NON-SAMPLING RISKS, RELIANCE ON MANAGEMENT’S REPRESENTATION, INHERENT LIMITATIONS OF THE CLIENTS ACCOUNTING AND INTERNAL CONTROL PROCESS, NATURE OF EVIDENCE

100 – FOUR SOURCES OF NEED FOR INDEPENDENT FINANCIAL STATEMENT AUDIT

100 – ANSWER: CONFLICT OF INTEREST BETWEEN MANAGEMENT AND USERS OF FINANCIAL STATEMENTS, EXPERTISE, REMOTENESS, FINANCIAL CONSEQUENCES

101 – TEN GENERALLY ACCEPTED AUDITING STANDARDS

101 – ANSWER: TECHNICAL TRAINING AND PROFICIENCY, INDEPENDENCE, PROFESSIONAL CARE, PLANNING, INTERNAL CONTROL CONSIDERATION, EVIDENTIAL MATTER, GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, INCONSISTENCY, DISCLOSURE, OPINION

102 – SIX ELEMENTS OF A SYSTEM OF QUALITY CONTROL

102 – ANSWER: LEADERSHIP RESPONSIBILITIES FOR QUALITY ON AUDITS, RELEVANT ETHICAL REQUIREMENTS, ACCEPTANCE AND CONTINUANCE OF CLIENT RELATIONSHIPS, HUMAN RESOURCES AND ASSIGNMENT, ENGAGEMENT PERFORMANCE, MONITORING

103 – RESPONSIBILITIES OF THE ENGAGEMENT PARTNER DURING THE ENGAGEMENT PERFORMANCE

103 – ANSWER: DIRECTION, SUPERVISION,REVIEW, MANAGE CONSULTATION

104 – ACCOUNTS RECEIVABLE

104 – ANSWER: ACCOUNTS RECEIVABLE REFERS TO SHORTTERM AMOUNTS DUE FROM BUYERS TO A SELLER WHO HAVE PURCHASED GOODS OR SERVICES FROM THE SELLER ON CREDIT AND NOT SUPPORTED BY A PROMISSORY NOTE

105 – ADVANCES TO AFFILIATES

105 – ANSWER: SIMILAR TO ACCOUNTS RECEIVABLE BUT INVOLVES A PARENT AND ITS SUBSIDIARY OR AFFILIATE AND IS CONSIDERED NON-CURRENT ASSET AND LONG-TERM INVESTMENT

106 – SPECIAL DEPOSITS ON CONTRACT BIDS

106 – ANSWER: ARE RECEIVABLES FROM PROSPECTIVE CUSTOMERS WHICH ARE TO BE RETURNED WHEN THE BIDDING PROCESS IS COMPLETED. THE PURPOSE OF THESE DEPOSITS IS TO GUARANTEE THAT THE BIDDER WILL TAKE ON THE JOB IF SELECTED. CURRENT IF COLLECTIBLE CURRENTLY

107 – INITIAL MEASUREMENT OF ACCOUNTS RECEIVABLES

107 – ANSWER: AN ACCOUNTS RECEIVABLE IS A FINANCIAL INSTRUMENT AND FINANCIAL INSTRUMENTS ARE INITIALLY CARRIED AT FAIR VALUE PLUS TRANSACTION COSTS THAT ARE DIRECTLY ATTRIBUTABLE TO THE ACQUISITION OF THE INSTRUMENT. THE FAIR VALUE IS USUALLY THE TRANSACTION PRICE OR THE FAIR VALUE OF THE CONSIDERATION GIVEN.

108 – SUBSEQUENT MEASUREMENT OF ACCOUNTS RECEIVABLE

108 – ANSWER: ACCOUNTS RECEIVABLE IS SUBSEQUENTLY MEASURED AT NET REALIZABLE VALUE OR ESTIMATED RECOVERABLE AMOUNT

109 – FOB SHIPPING POINT VS. FOB DESTINATION

109 – ANSWER: FOB SHIPPING POINT – THE OWNERSHIP OF THE GOODS IS TRANSFERRED TO THE BUYER UPON SHIPMENT THUS ALL RISKS AND RESPONSIBILITIES (SUCH AS TO PAY FOR FREIGHT EXPENSES) ARE ALSO TRANSFERRED. FOB DESTINATION – THE OWNERSHIP OF THE GOODS IS TRANSFERRED TO THE BUYER UPON ARRIVAL TO THE BUYER’S RECEIVING DOCK

110 – FREIGHT PREPAID VS. FREIGHT COLLECT

110 – ANSWER: REGARDLESS OF WHO IS OBLIGED TO INCUR THE EXPENSE: FREIGHT PREPAID – THE SELLER HAS PAID FOR THE SHIPPING COSTS FREIGHT COLLECT – THE BUYER WILL PAY FOR THE SHIPPING COSTS

111 – ENTRY TO RECORD SALE ON ACCOUNT UNDER FOB SHIPPING POINT FREIGHT PREPAID. SELLING PRICE (10,000); FREIGHT (100)

111 – ANSWER: DR. ACCOUNTS RECEIVABLE 10,100 CR. SALES 10000; CASH 100

112 – ENTRY TO RECORD SALE ON ACCOUNT UNDER FOB SHIPPING POINT FREIGHT COLLECT. SELLING PRICE (10,000); FREIGHT (100)

112 – ANSWER: DR. ACCOUNTS RECEIVABLE 10,000 CR. SALES 10,000

113 – ENTRY TO RECORD SALES ON ACCOUNT FOB DESTINATION FREIGHT PREPAID. SELLING PRICE (10,000); FREIGHT (100)

113 – ANSWER: DR. ACCOUNTS RECEIVABLE 10,000; FREIGHTOUT 100; CR. SALES 10,000; CASH 10,000

114 – ENTRY TO RECORD SALE ON ACCOUNT FOB DESTINATION FREIGHT COLLECT. SELLING PRICE (10,000); FREIGHT (100)

114 – ANSWER: DR. ACCOUNTS RECEIVABLE 9,900; FREIGHTOUT 100; CR. SALES 10,000

115 – GROSS METHOD VS. NET METHOD IN ACCOUNTING FOR SALES ON ACCOUNT

115 – ANSWER: GROSS METHOD – AN INVOICE IS RECORDED AT FULL PRICE WITHOUT REGARD TO ANY CASH DISCOUNTS OFFERED. NET METHOD – ASSUMES THE RETAILER ALWAYS TAKES ADVANTAGE OF THE DISCOUNTED CASH PRICE AND RECORDS THE PURCHASED INVENTORY AT THE DISCOUNTED PRICE. THEREFORE, INVOICE IS RECORDED NET OF DISCOUNT

116 – ENTRY TO RECORD SALE ON ACCOUNT USING GROSS METHOD. SELLING PRICE (10,000); TERMS (2/10, N/30)

116 – ANSWER: DR. ACCOUNTS RECEIVABLE 10,000; CR. SALES 10,000

117 – ENTRY TO RECORD SALE ON ACCOUNT USING NET METHOD. SELLING PRICE (10,000); TERMS (2/10, N/30)

117 – ANSWER: DR. ACCOUNTS RECEIVABLE 9,800; CR. SALES 9,800

118 – ENTRY TO RECORD COLLECTION OF ACCOUNTS WITHIN THE DISCOUNT PERIOD UNDER GROSS METHOD. SELLING PRICE (10,000); TERMS (2/10, N/30)

118 – ANSWER: DR. CASH 9,800; SALES DISCOUNT 200; ACCOUNTS RECEIVABLE 10,000

119 – ENTRY TO RECORD COLLECTION OF ACCOUNTS WITHIN THE DISCOUNT PERIOD UNDER NET METHOD. SELLING PRICE (10,000); TERMS (2/10, N/30)

119 – ANSWER: DR. CASH 9,800; CR. ACCOUNTS RECEIVABLE 9,800

120 – ENTRY TO RECORD COLLECTION OF ACCOUNTS BEYOND THE DISCOUNT PERIOD UNDER GROSS METHOD. SELLING PRICE (10,000); TERMS (2/10, N/30)

120 – ANSWER: DR. CASH 10,000; CR. ACCOUNTS RECEIVABLE 10,000

121 – ENTRY TO RECORD COLLECTION OF ACCOUNTS BEYOND THE DISCOUNT PERIOD UNDER NET METHOD. SELLING PRICE (10,000); TERMS (2/10, N/30)

121 – ANSWER: DR. CASH 10,000; CR. ACCOUNTS RECEIVABLE 9,800; SALES DISCOUNT FORFEITED 200

122 – DIRECT WRITE-OFF VS. ALLOWANCE METHOD

122 – ANSWER: DIRECT WRITE-OFF – BAD DEBTS ARE CHARGED AS SOON AS IT IS APPARENT THAT AN INVOICE WILL NOT BE PAID. ALLOWANCE METHOD – AN ESTIMATE OF THE FUTURE AMOUNT IS CHARGED PERIODICALLY. IT IS PREFERRED BECAUSE IT REFLECTS THE ESTIMATED REALIZABLE VALUE OF ACCOUNTS RECEIVABLE.

123 – ENTRY TO RECORD PROVISION FOR DOUBTFUL ACCOUNTS UNDER ALLOWANCE METHOD

123 – ANSWER: DR. DOUBTFUL ACCOUNTS EXPENSE; CR. ALLOWANCE FOR DOUBTFUL ACCOUNTS

124 – ENTRY TO RECORD WRITE-OFF OF RECEIVABLE UNDER ALLOWANCE METHOD

124 – ANSWER: DR. ALLOWANCE FOR DOUBTFUL ACCOUNTS; CR. ACCOUNTS RECEIVABLE

125 – ENTRY TO RECORD WRITE-OFF OF RECEIVABLE UNDER DIRECT WRITE-OFF METHOD

125 – ANSWER: DR. BAD DEBTS EXPENSE; CR. ACCOUNTS RECEIVABLE

126 – ENTRY TO REVERSE WRITE-OFF OF ACCOUNTS RECEIVABLE UNDER ALLOWANCE METHOD

126 – ANSWER: DR. ACCOUNTS RECEIVABLE; CR. ALLOWANCE FOR DOUBTFUL ACCOUNTS

127 – ENTRY TO REVERSE WRITE-OFF OF ACCOUNTS RECEIVABLE UNDER DIRECT WRITE-OFF METHOD

127 – ANSWER: DR. ACCOUNTS RECEIVABLE; CR. BAD DEBTS EXPENSE

128 – CLASSIFICATION OF BAD DEBTS EXPENSE AS AN OPERATING EXPENSE (ADMINISTRATIVE OR SELLING EXPENSE)

128 – ANSWER: IF GRANTING OF CREDIT AND COLLECTION OF ACCOUNTS ARE UNDER THE CHARGE OF THE SALES MANAGER, DOUBTFUL ACCOUNTS SHALL BE CONSIDERED AS DISTRIBUTION COST. IF UNDER AN OFFICER, IT IS ADMINISTRATIVE EXPENSE. IN THE ABSENCE TO THE CONTRARY IT IS ADMIN EXPENSE.

129 – INVENTORIES

129 – ANSWER: INVENTORIES ARE ASSETS HELD FOR SALE, OR IN THE PROCESS OF PRODUCTION, OR TO BE CONSUMED IN THE PRODUCTION PROCESS.

130 – CONSIGNED GOODS

130 – ANSWER: RECORDED BY THE CONSIGNOR USING A MEMORANDUM ENTRY. STILL INCLUDED IN THE INVENTORY OF THE CONSIGNOR.

131 – NORMAL VS. ABNORMAL INVENTORY SHORTAGE

131 – ANSWER: NORMAL SHORTAGE IS CLOSED TO COST OF GOODS SOLD. ABNORMAL SHORTAGE IS TREATED AS OUTRIGHT EXPENSE.

132 – THREE ITEMS THAT COMPRISE THE COST OF INVENTORY

132 – ANSWER: COST OF PURCHASE, COST OF CONVERSION, OTHER COSTS TO BRING THE INVENTORY TO ITS PRESENT LOCATION OR CONDITION

133 – ACCOUNTING TREATMENT WHEN INVENTORIES ARE PURCHASED WITH DEFERRED SETTLEMENT TERMS

133 – ANSWER: DIFFERENCE BETWEEN INSTALLMENT PRICE AND NORMAL CREDIT TERM PRICE IS TREATED AS INTEREST EXPENSE. INVENTORY IS VALUATED AT NORMAL CREDIT TERM PRICE.

134 – ACCOUNTING TREATMENT FOR STORAGE COST

134 – ANSWER: STORAGE COSTS FOR GOODS IN PROCESS ARE CAPITALIZED. WHILE STORAGE COSTS FOR FINISHED GOODS ARE EXPENSED OUTRIGHT.

135 – THREE CURRENTLY ACCEPTABLE INVENTORY VALUATION METHODS

135 – ANSWER: SPECIFIC IDENTIFICATION, FIRST IN – FIRST OUT, WEIGHTED AVERAGE METHODS

136 – TWO SYSTEMS OF KEEPING RECORDS OF INVENTORY

136 – ANSWER: PERPETUAL AND PERIODIC INVENTORY SYSTEMS

137 – SUBSEQUENT MEASUREMENT OF LOAN AND NOTES RECEIVABLES

137 – ANSWER: AMORTIZED COST

138 – VALUATION OF INVENTORIES

138 – ANSWER: LOWER OF COST AND NET REALIZABLE VALUE

139 – NET REALIZABLE VALUE FORMULA

139 – ANSWER: NET REALIZABLE VALUE = INVENTORY MARKET VALUE – COSTS TO COMPLETE AND SELL THE GOODS

14O – 1) ENTRY TO WRITE-DOWN INVENTORY TO NET REALIZABLE VALUE. COST (1,000); NRV (800) 2) ENTRY TO RECORD REVERSAL OF INVENTORY WRITE-DOWN. NEW NRV (1,100)

140 – ANSWER: 1) DR. LOSS ON INVENTORY WRITE-DOWN 200; CR. MERCHANDISE INVENTORY 200 2) DR. MERCHANDISE INVENTORY 200; CR. LOSS ON INVENTORY WRITE-DOWN 200

141 – ACCOUNTING FOR PURCHASE COMMITMENTS. PURCHASE COMMITMENT (1,200 UNITS @ 2.00); DEC. 31 MARKET PRICE (1.80); PURCHASE DATE MARKET PRICE (1.75)

141 – ANSWER: DEC 31 – DR. LOSS ON PURCHASE COMMITMENT 240; CR. PURCHASE COMMITMENTS LIABILITY 240 PURCHASE DATE – DR. PURCHASES 2100; PURCHASE COMMITMENTS LIABILITY 240; LOSS ON PURCHASE COMMITMENT 60; CR. ACCOUNTS PAYABLE 2,400

142 – RULES IN CASE OF LOSS OF DETERMINATE THING WITH AND WITHOUT DEBTOR’S FAULT

142 – ANSWER: WITH DEBTOR’S FAULT – DEBTOR IS OBLIGED TO PAY DAMAGES WITHOUT DEBTOR’S FAULT – THE OBLIGATION IS EXTINGUISHED

143 – RULES IN CASE OF DETERIORATION OF THE DETERMINATE THING WITH AND WITHOUT DEBTOR’S FAULT

143 – ANSWER: WITH DEBTOR’S FAULT – CREDITOR MAY CHOOSE BETWEEN RECISSION + DAMAGES OR FULFILLMENT + DAMAGES WITHOUT DEBTOR’S FAULT – THE IMPAIRMENT SHALL BE BORNE BY THE CREDITOR

144 – RULES IN CASE OF IMPROVEMENT OF DETERMINATE THING BY NATURE OR BY TIME AND AT THE EXPENSE OF THE DEBTOR

144 – ANSWER: BY NATURE OR BY TIME – THE IMPROVEMENT SHALL BE FOR THE BENEFIT OF THE CREDITOR AT THE EXPENSE OF THE DEBTOR – THE DEBTOR CAN ONLY BE GRANTED USUFRUCTUARY RIGHTS

145 – RULES IN CASE OF FULFILLMENT OF RESOLUTORY CONDITION

145 – ANSWER: THE OBLIGATION IS EXTINGUISHED, THE PARTIES SHALL RETURN TO EACH OTHER WHAT THEY HAVE RECEIVED, AND THE SAME RULES APPLY IN CASE OF LOSS, DETERIORATION OR IMPROVEMENT OF THE TIHING (ART. 1189)

146 – CONCEPT OF RECIPROCAL OBLIGATIONS

146 – ANSWER: IN A RECIPROCAL OBLIGATION, EACH PARTY IS A DEBTOR AND A CREDITOR OF THE OTHER

147 – REMEDIES OF THE INJURED PARTY IN RECIPROCAL OBLIGATION

147 – ANSWER: RECISSION WITH DAMAGES OR FULFILLMENT OF THE OBLIGATION WITH DAMAGES (BUT NOT BOTH)

148 – PERIOD VS. DAY CERTAIN

148 – ANSWER: PERIOD – SPACE OF TIME DAY CERTAIN – A POINT IN TIME WHICH MUST NECESSARILY HAPPEN ALTHOUGH IT MAY NOT BE KNOWN WHEN

149 – FIVE KINDS OF PERIOD

149 – ANSWER: EX DIE (SUSPENSIVE), IN DIEM (RESOLUTORY), LEGAL, VOLUNTARY, JUDICIAL

150 – INSTANCES WHEN THE COURT MAY FIX THE PERIOD

150 – ANSWER: WHEN IT CAN BE INFERRED THAT A PERIOD WAS INTENDED, WHEN THE DURATION OF THE PERIOD DEPENDS UPON THE WILL OF THE DEBTOR

151 – PRESUMPTIONS AS TO WHO HAS THE BENEFIT OF THE PERIOD

151 – ANSWER: IT IS PRESUMED TO HAVE BEEN ESTABLISHED FOR THE BENEFIT OF BOTH THE CREDITOR AND THE DEBTOR

152 – FIVE INSTANCES WHEN THE CREDITOR MAY DEMAND IMMEDIATE PAYMENT IN OBLIGATIONS WITH A PERIOD

152 – ANSWER: WHEN THE DEBTOR BECOMES INSOLVENT, FAILS TO FURNISH THE GUARANTEES OR SECURITIES THAT HE HAS PROMISED, IMPAIRS THE SAID GUARANTEES OR SECURITIES BY HIS OWN ACT OR BY FORTUITOUS EVENT UNLESS HE GIVES A NEW AND SIMILAR ONE, VIOLATES ANY UNDERTAKING, ATTEMPTS TO ABSCOND [IFIVA]

153 – TWO KINDS OF OBLIGATIONS ACCORDING TO THE NUMBER OF PRESTATIONS

153 – ANSWER: SIMPLE AND COMPOUND OBLIGATIONS

154 – TWO KINDS OF COMPOUND OBLIGATIONS

154 – ANSWER: CONJUNCTIVE AND DISJUNCTIVE/DISTRIBUTIVE

155 – WHO HAS THE RIGHT TO CHOOSE PRESTATION IN ALTERNATIVE OBLIGATIONS

155 – ANSWER: THE DEBTOR, UNLESS EXPRESSLY GIVEN TO THE CREDITOR

156 – TWO LIMITATIONS ON DEBTOR’S RIGHT TO CHOOSE

156 – ANSWER: THE DEBTOR MUST COMPLETELY PERFORM THE PRESTATION CHOSEN (NOT PART OF ONE AND PART OF ANOTHER UNDERTAKING), HE CANNOT CHOOSEE THOSE PRESTATIONS WHICH ARE IMPOSSIBLE OR UNLAWFUL OR COULD NOT HAVE BEEN THE OBJECT OF THE OBLIGATION

157 – THREE INSTANCES WHEN THE OBLIGATION CEASES TO BE ALTERNATIVE AND BECOMES A SIMPLE OBLIGATION

157 – ANSWER: WHEN THE DEBTOR HAS COMMUNICATED HIS CHOICE TO THE CREDITOR, WHEN ONLY ONE PRESTATION REMAIN PRACTICABLE, WHEN THE CREDITOR HAS COMMUNICATED HIS CHOICE TO THE DEBTOR IF THE RIGHT TO CHOOSE HAS BEEN EXPRESSLY GIVEN TO HIM

158 – FIVE RULES IN CASE OF LOSS OF THINGS OR IMPOSSIBILITY OF SERVICES WHICH ARE ALTERNATIVELY THE OBJECT OF THE OBLIGATION BEFORE THE CHOICE OF THE DEBTOR IS COMMUNICATED (RIGHT IS WITH DEBTOR)

158 – ANSWER: MAHABA

159 – FOUR RULES IN CASE OF LOSS OF THINGS OR IMPOSSIBILITY OF SERVICES WHICH ARE ALTERNATIVELY THE OBJECT OF THE OBLIGATION BEFORE THE CHOICE OF THE CREDITOR IS COMMUNICATED (RIGHT IS WITH CREDITOR)

159 – ANSWER: MAHABA

160 – RULES IN CASE OF LOSS OF PRINCIPAL THING AND SUBSTITUTE BEFORE SUBSTITUTION

160 – ANSWER: BEFORE SUBSTITUTION: PRINCIPAL – FORTUITOUS EVENT (EXTINGUISHED), DEBTOR’S FAULT (LIABILITY TO PAY DAMAGES) SUBSTITUTE – NO EFFECT, FORTUITOUS EVENT OR DEBTOR’S FAULT

161 – RULES IN CASE OF LOSS OF PRINCIPAL THING AND SUBSTITUTE AFTER SUBSTITUTION

161 – ANSWER: PRINCIPAL – NO EFFECT, FORTUITOUS EVENT OR DEBTOR’S FAULT SUBSTITUTE – FORTUITOUS EVENT (EXTINGUISHED), DEBTOR’S FAULT (LIABILITY TO PAY DAMAGES)

162 – THREE KINDS OF SOLIDARY OBLIGATIONS

162 – ANSWER: PASSIVE SOLIDARITY, ACTIVE SOLIDARITY, MIXED SOLIDARITY

163 – FIVE TERMS FOR SOLIDARY OBLIGATIONS

163 – ANSWER: JOINTLY AND SEVERALLY, INDIVIDUALLY AND COLLECTIVELY, IN SOLIDUM, MANCOMUNADA SOLIDARIA, JUNTOS O SEPARADAMENTE

58 – FOUR TERMS FOR JOINT OBLIGATION

58 – ANSWER: PROPORTIONATELY, PRO RATA, MANCOMUNADA, MANCOMUNADA SIMPLE

59 – THREE EXEMPTIONS TO THE JOINT OBLIGATION PRESUMPTION MAKING THE OBLIGATION SOLIDARY

59 – ANSWER: WHEN THE OBLIGATION EXPRESSLY SO STATES, WHEN THE LAW REQUIRES SOLIDARITY, WHEN THE NATURE OF THE OBLIGATION REQUIRES SOLIDARITY

60 – EXPLAIN THE CONCEPT OF EXISTENCE OF SOLIDARITY DESPITE DIFFERENT PERIODS AND CONDITIONS

60 – ANSWER: GIVE AN EXAMPLE

61 – EFFECT OF UNAUTHORIZED ASSIGNMENT OF CREDITOR’S RIGHT

61 – ANSWER: THE NON-ASSIGNING CREDITORS MAY RECOVER THEIR RESPECTIVE SHARES FROM THE ASSIGNING CREDITOR IN CASE THE ASSIGNEE WHO HAS COLLECTED THE DEBT FAILS TO GIVE THEM THEIR SHARES

62 – THREE DEFENSES AVAILABLE TO SOLIDARY DEBTORS

62 – ANSWER: THOSE DERIVED FROM THE NATURE OF THE OBLIGATION, THOSE PERSONAL TO THE DEBTOR BEING SUED, THOSE PERSONAL TO OTHER DEBTORS

63 – FIVE CHARACTERISTICS OF JOINT INDIVISIBLE OBLIGATION

63 – ANSWER: ALL CREDITORS MUST MAKE THE DEMAND, THE DEMAND MUST BE MADE AGAINST ALL DEBTORS, THE RENUNCIATION MADE BY A JOINT CREDITOR EXTINGUISHES ONLY HIS OWN SHARE, ONLY THE DEBTOR WHO DOES NOT COMPLY WITH HIS UNDERTAKING SHALL BE LIABLE FOR DAMAGES, INSOLVENCY OF A DEBTOR SHALL NOT MAKE THE OTHERS LIABLE FOR DAMAGES

64 – THREE OBLIGATIONS DEEMED DIVISIBLE

64 – ANSWER: WHEN THE OBLIGATION HAS FOR ITS OBJECT THE EXECUTION OF A CERTAIN NUMBER OF DAYS OF WORK, THE ACCOMPLISHMENT OF WORK BY METRICAL UNITS, ANALOGOUS THINGS SUSCEPTIBLE OF PARTIAL PERFORMANCE

65 – THREE OBLIGATIONS DEEMED INDIVISIBLE

65 – ANSWER: OBLIGATIONS TO GIVE DEFINITE THINGS, THOSE NOT SUSCEPTIBLE OF PARTIAL PERFORMANCE, THOSE THAT ARE TREATED INDIVISIBLE BY PROVISION OF LAW, THOSE INTENDED BY THE PARTIES TO BE INDIVISIBLE

66 – TWO FUNCTIONS OF PENAL CLAUSE

66 – ANSWER: TO PROVIDE LIQUIDATED DAMAGES, TO STRENGTHEN THE COERCIVE FORCE OF THE OBLIGATION

67 – FOUR KINDS OF PENAL CLAUSE

67 – ANSWER: LEGAL, CONVENTIONAL; SUBSIDIARY, JOINT

68 – EXCEPTIONS WHEN ASIDE FROM PENALTY, INTEREST AND DAMAGES MAY ALSO BE DEMANDED

68 – ANSWER: WHEN THERE IS STIPULATION TO THAT EFFECT, THE DEBTOR REFUSES TO PAY THE PENALTY, THE DEBTOR IS GUILTY OF FRAUD IN THE PERFORMANCE OF THE OBLIGATION

69 – CASES WHEN THE COURT MAY REDUCE THE PENALTY

69 – ANSWER: WHEN THE OBLIGATION HAS BEEN PARTLY COMPLIED WITH, THE OBLIGATION HAS BEEN IRREGULARLY COMPLIED WITH, THE PERNALTY HAS BEEN INIQUITOUS OR UNCONSCIONABLE EVEN IF THERE HAS BEEN NO PERFORMANCE

70 – EFFECT OF NULLITY OF PRINCIPAL OBLIGATION, PENAL CLAUSE

70 – ANSWER: THE NULLITY OF THE PRINCIPAL OBLIGATION CARRIES WITH IT THE NULLITY OF THE PENAL CLAUSE, THE NULLITY OF THE PENAL CLAUSE DOES NOT CARRY WITH IT THE NULLITY OF THE PRINCIPAL OBLIGATION

22 – FORMULA FOR TAXABLE INCOME

22 – ANSWER: GROSS INCOME XXX LESS: DEDUCTIONS XXX TAXABLE INCOME XXX

23 – TAXABLE INCOME BRACKETS UNDER THE GRADUATED INCOME TAX TABLE

23 – ANSWER: NOT OVER 250,000 OVER 250,000 BUT NOT OVER 400,000 OVER 400,000 BUT NOT OVER 800,000 OVER 800,000 BUT NOT OVER 2,000,000 OVER 2,000,000 BUT NOT OVER 8,000,000 OVER 8,000,000

24 – TAX AMOUNT AND RATES UNDER THE GRADUATED INCOME TAX TABLE

24 – ANSWER: 0% 20% 30,000 + 25% OF EXCESS OVER 250,000 130,000 + 30% OF EXCESS OVER 500,000 490,000 + 32% OF EXCESS OVER 2,000,000 2,410,000 + 35% OF EXCESS OVER 5,000,000

25 – THREE RULES ON CENTAVOS IN THE COMPUTATION OF INDIVIDUAL INCOME TAX

25 – ANSWER: 1) CENTAVOS ARE ALLOWED IN THE GROSS INCOME AND DEDUCTIONS 2) IN THE TAXABLE INCOME, 50 CENTS OR MORE ARE CONSIDERED P1.00 3) IN THE TAXABLE INCOME, CENTAVOS LESS THAN 50 CENTS ARE DISREGARDED

26 – RULE # 1: THOSE WHOSE GROSS ANNUAL SALES OR RECEIPTS AND OTHER NONOPERATING INCOME DO NOT EXCEED THE THRESHOLD OF P3,000,000

26 – ANSWER: 1) WITH INCOME LEVEL NOT OVER P250,000 – EXEMPT FROM INCOME TAX 2) WITH INCOME LEVEL P250,000 AND ABOVE – [OPTION 1] 8% ON GROSS SALES OR RECEIPTS IN EXCESS OF 250,000 [OPTION 2] GRADUATED TAX ON THE TAXABLE INCOME

27 – RULE # 2: THOSE WHOSE GROSS SALES OR RECEIPTS AND OTHER NON-OPERATING INCOME EXCEED THE THRESHOLD OF P3,000,000

27 – ANSWER: GRADUATED TAX ON THE TAXABLE INCOME

28 – INCOME TAX RULE ON MIXED INCOME EARNERS

28 – ANSWER: ON COMPENSATION INCOME: GRADUATED RATES + ON INCOME FROM BUSINESS OR PROFESSION: RULES # 1 AND 2

29 – MR. A, A RESIDENT CITIZEN, HAD A GROSS COMPENSATION INCOME OF P240,00 IN 2018. HOW MUCH WAS THE INCOME TAX?

29 – ANSWER: P0.00

30 – MR. B, A RESIDENT CITIZEN, HAD A GROSS COMPENSATION INCOME OF P300,000 IN 2018.

30 – ANSWER: P10,000

31 – MR. C, A RESIDENT CITIZEN, HAD A GROSS COMPENSATION INCOME OF P2,100,000 IN 2018. HOW MUCH WAS THE INCOME TAX?

31 – ANSWER: P522,000

32 – MR. D IS IN BUSINESS WITH THE FOLLOWING DATA IN A YEAR: GROSS SALES (P2,000,000), BUSINESS EXPENSES (P1,800,000). HOW MUCH WAS THE INCOME TAX?

32 – ANSWER: P0.00

33 – MR. E IS IN BUSINESS WITH THE FOLLOWING DATA IN A YEAR: GROSS SALES (P2,000,000), BUSINESS EXPENSES (P900,000). HOW MUCH WAS THE INCOME TAX?

33 – ANSWER: OPTION 1 (P140,000) OPTION 2 (P220,000)

34 – MR. F IS IN BUSINESS WITH THE FOLLOWING DATA IN A YEAR: GROSS SALES (P4,000,000), BUSINESS EXPENSES (P2,900,000). HOW MUCH WAS THE INCOME TAX?

34 – ANSWER: P220,000

35 – MISS F HAD THE FOLLOWING DATA IN 2018: GROSS RECEIPTS FROM PROFESSION (P4,500,000); EXPENSES ON THE PRACTICE OF PROFESSION (P2,500,000); GROSS COMPENSATION INCOME AS A CEO IN A PRIVATE CORPORATION (P6,000,000). HOW MUCH WAS THE INCOME TAX?

35 – ANSWER: P2,410,000

36 – RULES ON THE COMPUTATION OF INCOME TAX OF MARRIED TAXPAYERS

36 – ANSWER: EACH SPOUSE SHALL COMPUTE HIS OR HER INCOME TAX SEPERATELY; AND ANY INCOME THAT CANNOT BE DEFINITELY IDENTIFIED AS INCOME EXCLUSIVELY EARNED BY EITHER OF THE SPOUSES WILL BE DIVIDED EQUALLY BETWEEN THEM IN THE DETERMINATION OF TAXABLE INCOME.

37 – SPOUSES MR. A (OPTION 2) AND MRS. A (OPTION 1) HAD THE FOLLOWING DATA IN A YEAR: • GROSS SALES OF MR. A FROM BUSINESS (P4,500,000) • GROSS RECEIPTS OF MRS. A FROM PRACTICE OF PROFESSION (P900,000) • GROSS RENT INCOME (P500,000) • COST AND EXPENSES, BUSINESS OF MR. A (P2,500,000) • COST AND EXPENSES, PROFESSION OF MRS. A (P20000) • EXPENSES ON RENTAL PROPERTY (P200,000)

37 – ANSWER: MRS. A – OPTION 1 (630,000); MRS. A – OPTION 2 (683,000)

38 – FINAL TAX ON INTEREST FROM CURRENCY DEPOSITS, TRUST FUNDS AND DEPOSIT SUBSTITUTES (INDIVIDUALS)

38 – ANSWER: 20% FOR ALL INDIVIDUAL TAXPAYERS (EXCEPT NRA-NETB)

39 – FINAL TAX ON ROYALTIES (INDIVIDUALS)

39 – ANSWER: FOR ALL INDIVIDUAL TAXPAYERS (EXCEPT NRANETB): 20% – IN GENERAL 10% – ON BOOKS AS WELL AS LITERARY AND MUSICAL COMPOSITIONS

40 – FINAL TAX ON PRIZES (INDIVIDUALS)

40 – ANSWER: FOR ALL INDIVIDUAL TAXPAYERS (EXCEPT NRANETB): P10,000 OR LESS – GRADUATED INCOME TAX RATE MORE THAN P10,000 – 20%

41 – FINAL TAX ON WINNINGS (INDIVIDUALS)

41 – ANSWER: FOR ALL INDIVIDUAL TAXPAYERS (EXCEPT NRANETB): IN GENERAL – 20% FROM PCSO AND LOTTO AMOUNTING TO P10,000 OR LESS – EXEMPT

42 – FINAL TAX ON INTEREST INCOME FROM A DEPOSITORY BANK UNDER THE EXPANDED FOREIGN CURRENCY DEPOSIT SYSTEM (INDIVIDUALS)

42 – ANSWER: FOR CITIZENS AND RESIDENT ALIEN – 15%

43 – FINAL TAX ON CASH AND/OR PROPERTY DIVIDENDS RECEIVED BY AN INDIVIDUAL FROM A DOMESTIC CORPORATION/ JOINT STOCK COMPANY/ INSURANCE OR MUTUAL FUND COMPANIES/ REGIONAL OPERATING HEADQUARTER OF MULTINATIONAL COMPANIES (INDIVIDUALS)

43 – ANSWER: FOR CITIZENS AND RESIDENT ALIEN – 10% FOR NRA-ETB – 20%

44 – FINAL TAX ON SHARE OF AN INDIVIDUAL IN THE DISTRIBUTABLE NET INCOME AFTER TAX OF A PARTNERSHIP (EXCEPT GPPS)/ ASSOCIATION, A JOINT ACCOUNT, A JOINT VENTURE OR CONSORTIUM TAXABLE AS CORPORATION OF WHICH HE IS A MEMBER OR CO-VENTURE

44 – ANSWER: FOR CITIZENS AND RESIDENT ALIEN – 10% FOR NRA ETB – 20%

45 – CAPITAL GAINS TAX FROM SALE, EXCHANGE OR OTHER DISPOSITION OF REAL PROPERTY LOCATED IN THE PHILIPPINES, CLASSIFIED AS CAPITAL ASSET (INDIVIDUALS)

45 – ANSWER: FOR ALL INDIVIDUAL TAXPAYERS– 6%

46 – FINAL TAX FOR INTEREST INCOME FROM LONG-TERM DEPOSIT (5 YEARS) OR INVESTMENT IN THE FORM OF SAVINGS, COMMON OR INDIVIDUAL TRUST FUNDS, DEPOSIT SUBSTITUTES, INVESTMENT MANAGEMENT ACCOUNTS AND OTHER INVESTMENTS EVIDENCED BY CERTIFICATES IN SUCH FORM PRESCRIBED BY THE BANGKO SENTRAL NG PILIPINAS (BSP)

46 – ANSWER: FOR ALL INDIVIDUAL TAXPAYERS - EXEMPT

47 – FINAL TAX RATES ON INCOME FROM PRETERMINATED LONG-TERM DEPOSIT OR INVESTMENT… (INDIVIDUALS)

47 – ANSWER: 4 TO LESS THAN 5 YEARS – 5% 3 TO LESS THAN 4 YEARS – 12% LESS THAN 3 YEARS – 20%

48 – NET CAPITAL GAINS TAX FROM SALE OF SHARES OF STOCK NOT TRADED IN THE STOCK EXCHANGE

48 – ANSWER: FOR CITIZENS AND RESIDENT ALIEN – 15% FOR NRA ETB/NETB – 5% TO AMOUNT NOT EXCEEDING P100,000 AND 10% TO ANY AMOUNT EXCEEDING P100,000

49 – INCOME TAX FOR NON-RESIDENT ALIENS NOT ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES

49 – ANSWER: 25% OF GROSS INCOME DERIVED FROM ALL SOURCES WITHIN THE PHILIPPINES