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ACC106 - Financial Analysis and Reporting > 1. Introduction to Financial Reporting > Flashcards

1. Introduction to Financial Reporting Flashcards

1
Q

Defined as:

  • a service activity
  • an information system that measures, processes and communicates financial information about an economic entity.
  • a process of identifying, measuring and communicating economic information to permit informed judgments and
    decisions by users of the information.
  • an art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are of a financial character and interpreting the results thereof.
A

Accounting

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2
Q

Three Forms of Business Organizations

A

(1) Sole Proprietorship
(2) Partnership
(3) Corporation

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3
Q

Identify if:
A. Sole Proprietorship
B. Partnership
C. Corporation

  • Ownership:
    (1) single owner
    (2) owned by stockholder
    (3) owned by two or more persons
  • Manner of Creation
    (1) created by law
    (2) may operate without any formal
    organizing/operating procedure
    (3) partner’s agreement
  • Funding
    (1) Partner’s contribution (money,
    property, industry) to a common
    fund
    (2) Through sales of shares of stocks
    (3) Proprietor’s contribution
  • Extent of liability
    (1) personally liable for all debts of the
    business
    (2) Not personally liable for the
    corporation’s debts.
    (3) personally liable for all debts of the
    business
  • Transfer of Ownership
    (1) must have consent from all
    partners
    (2) exercise right of succession
A
  • Ownership
    1. Sole Proprietorship
    2. Corporation
    3. Partnership
  • Manner of Creation
    1. Corporation
    2. Sole Proprietorship
    3. Partnership
  • Funding
    1. Partnership
    2. Corporation
    3. Sole Proprietorship
  • Extent of liability
    1. Sole Proprietorship
    2. Corporation
    3. Partnership
  • Transfer of Ownership
    1. Partnership
    2. Exercise right of succession
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4
Q

GAAP

A

Generally Accepted Accounting Principles

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5
Q

Represents the rules, procedures, practice and standards followed in the preparation and presentation of financial statements.

A

GAAP: Generally Accepted Accounting Principles

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6
Q

PICPA

A

Philippine Institute of Certified Public Accountants

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7
Q

National professional organization of CPA’s in the Philippines

A

PICPA: Philippine Institute of Certified Public Accountants

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8
Q

FRSC

A

Financial Reporting Standards Council

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9
Q

Accounting standard setting body created by PRC upon recommendation of BOA to assist BOA in carrying out its powers and functions provided under
R.A. No. 9298.

A

FRSC: Financial Reporting Standards Council

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10
Q

The main function is to establish and improve accounting standards that will
be generally accepted in the Philippines.

constitute the highest hierarchy of
GAAP in the Philippines.

A

FRSC: Financial Reporting Standards Council

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11
Q

Approved statements of the FRSC are known as

A

PAS: Philippine Accounting Standards
PFRS: Philippine Financial Reporting Standards

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12
Q

PIC

A

Philippine Interpretations Committee

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13
Q

Formed by the FRSC in August 2006 and has replaced the Interpretations Committee (IC) formed by the ASC in May 2000.

A

PIC: Philippine Interpretations Committee

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14
Q

The role of the _____ is to prepare interpretations of PFRS for approval by the FRSC and to provide timely guidance on financial reporting issues not specifically addressed in current
PFRS.

A

PIC: Philippine Interpretations Committee

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15
Q

IASC

A

International Accounting Standards Committee

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16
Q

Independent private sector body, with the objective of achieving uniformity in the accounting principles which are used by business and other organizations for financial reporting around the world.

A

IASC: International Accounting Standards Committee

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17
Q
  • to formulate and publish in the public interest accounting standards to be
    observed in the presentation of financial statements
  • to promote their worldwide acceptance and observance.
  • To work generally for the improvement and harmonization of regulations,
    accounting standards and procedures relating to the presentation of financial
    statements.
A

objective of IASC

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18
Q

IASB

A

International Accounting Standards Board

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19
Q

now replace the IASC

A

IASB

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20
Q
  • publishes standards in a series of pronouncements called International Financial Reporting Standards of IFRS
  • has adopted the body of standards issued by IASC
A

IASB: International Accounting Standards Board

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21
Q

The pronouncements of the IASC continue to be designated as

A

IAS: International Accounting Standards

22
Q

standard – setting process
- Includes in the correct order research, discussion paper, exposure draft and accounting standards

A

IASB: International Accounting Standards Board

23
Q

Standards issued by other standard setting bodies such as USA FASB (Financial Accounting Standards Board) and IASB are considered.

A

IFRS: International Financial Reporting Standards

24
Q

Factors considered in moving to IAS

A

(1) Support of international accounting standards by Philippine organizations such as SEC, BOA, and PICPA.

(2) Increasing internalization of business which has heightened interest in common language for financial reporting.

(3) Improvement of international accounting standards or removal of the free choices of accounting treatments

(4) Increasing recognition of international accounting standards by the World bank and World Trade Organization

25
Q

The FRSC: Financial Reporting Standards Council issues a series of pronouncements called

A

PFRS: Philippine Financial Reporting Standards

26
Q

True or False:

(1) PFRS corresponds to IFRS
(2) PFRS are numbered different as their counterpart IFRS
(3) Philippine Accounting Standards corresponds to IASB.
(4) PAS are numbered the same as their counterpart IAS.
(5) Philippine Interpretations Committee corresponds to IFRIC (International Financial Reporting Interpretations Committee)

A
  1. True
  2. False ; numbered the same
  3. False : IAS
  4. True
  5. True
27
Q

is a summary of the terms and concepts that underlie the preparation and presentation of financial statements for external use.

A

Conceptual Framework

28
Q

Intended to guide standard setters, preparers and users of financial information in the preparation and presentation of statements

A

Conceptual Framework

29
Q

True or False:
In the absence of a standard or an interpretation that specifically applies to a transaction, management shall consider the applicability of the Conceptual Framework in developing and applying an accounting policy that results in information that is relevant and reliable

A

True

30
Q

True or False:
In case of conflict, IAS shall prevail
over the Conceptual Framework

A

False ; IFRS - International Financial Reporting Standards

31
Q

4 Qualitative Characteristics

A

(1) Understandability
(2) Relevance
(3) Reliability
(4) Comparability

32
Q

Under Reliability:

A

(1) Faithful representation
(2) Substance over form
(3) Neutrality
(4) Prudence
(5) Completeness

33
Q

4 Accounting Constraints:

A

(1) Timeliness
(2) Cost-benefit
(3) Balance between qualitative characteristics
(4) Fair presentation

34
Q

Elements of Financial Statements

A
  • Financial Position
    (1) Assets
    (2) Liabilities
    (3) Equity
  • Financial Performance
    (1) Income
    (2) Expense
35
Q

Other Elements as defined by SFAC

A

(1) Investments by owners
(2) Distribution to owners
(3) Comprehensive Income
(4) Revenues
(5) Expenses
(6) Gains
(7) Losses

36
Q

are increases in equity of a particular business enterprise resulting from transfers to the enterprise from other entities of something of value to
obtain or increase ownership interests (or equity) in it.

A

Investment by owners

37
Q

True or False:
Assets, most commonly received as
investments by owners, may also include services or satisfaction or conversion of liabilities of the enterprise.

A

True

38
Q

is a decrease in equity of a particular business enterprise resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners.

decrease ownership interest (or equity) in an enterprise.

A

Distribution to owners

39
Q

is the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non owner
sources.

It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

A

Comprehensive Income

40
Q

are inflows or other enhancements of assets of an entity or settlements of its
liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations.

A

Revenues

41
Q

are outflows or other consumption or using up of assets or incurrences of
liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major or central operations.

A

Expenses

42
Q

are increases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity during
a period except those that result from revenues or investments by owners

A

Gains

43
Q

are decreases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity during a period except those that result from expenses or distributions to owners.

A

Losses

44
Q

Complete Set of Financial Statements in American Setting

A

(1) Financial Position
(2) Earnings (net income)
(3) Comprehensive Income (total non owner change in equity)
(4) Cash flows during the period
(5) Investment by and distributions to owners during the period.

45
Q

Complete set of financial statements in Philippine Setting

A

(1) Statement of Financial Position
(2 Statement of Comprehensive Income
(3) Statement of Changes in Equity
(4) Statement of Cash Flows
(5) Notes to Financial Statements (comprising a summary of significant accounting policies and other explanatory notes)

46
Q

Five Measurement basis

A

(1) Historical cost
(2) Current cost
(3) Realizable value
(4) Present Value
(5) Current market Value

47
Q

Four Recognition Principle

A

(1) Asset recognition principle
(2) Liability recognition principle
(3) Income recognition principle
(4) Expense recognition principle

48
Q

Under Expense Recognition Principle:

A

a. Matching of cost with revenue
b. Systematic and Rational Allocation
c. Immediate Recognition
d. Non-Matching Principle

49
Q

Two Concepts of Capital

A

(1) Transaction Approach
(2) Capital Maintenance Approach

50
Q

Under Capital Maintenance approach:

A

a. Financial Capital Maintenance
b. Physical Capital Maintenance

ACC106 - Financial Analysis and Reporting (7 decks)

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