#3.1 : Accounting Concepts and Principles Flashcards

1
Q

It is the systematic process of measuring and reporting relevant financial information about the activities of an economic organization or unit.

A

Accounting

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2
Q

The underlying purpose of accounting

A

To provide financial information.

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3
Q

Why is accounting considered as the ‘language of the business’?

A

It communicates the financial condition and performance of a business to interested users for decision-making purposes.

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4
Q

These are broad, general statements or “rules” and “procedures” that serve as guides in the practice of accounting.

A

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

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5
Q

The accounting standards used in the Philippines

A

Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS)

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6
Q

The committee that adopted the accounting standards in the Philippines

A

Financial Reporting Standards Committee (FRSC)

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7
Q

4 Fundamental Concepts

A

Entity Concepts, Periodicity, Going Concern, and Accrual Basis

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8
Q

ENTITY CONCEPT

A

It regards the business enterprise as separate and distinct from its owners and other business enterprises.

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9
Q

PERIODICITY

A

It is the concept behind providing financial accounting information about the economic activities of an enterprise for specified time periods. For reporting purposes, one year is usually considered as one accounting period. It may be monthly, quarterly, or annually.

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10
Q

GOING CONCERN

A

It is a concept which assumes that the business enterprise will continue to operate indefinitely. This assumes that a company will continue to exist long enough to carry out its objectives and commitments and will not liquidate in the foreseeable future.

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11
Q

GOING CONCERN

A

It is a concept which assumes that the business enterprise will continue to operate indefinitely. This assumes that a company will continue to exist long enough to carry out its objectives and commitments and will not liquidate in the foreseeable future.

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12
Q

ACCRUAL BASIS

A

It requires that all business transactions and other events are recognized in the accounting records when they occur, rather than when the cash or equivalent is received or paid.

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13
Q

6 Basic Accounting Principles

A

Objectivity, Cost, Full Disclosure, Matching, Revenue Recognition, and Materiality

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14
Q

OBJECTIVITY PRINCIPLE

A

It states that all business transactions that will be entered in the accounting records must be duly supported by verifiable evidence.

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15
Q

COST PRINCIPLE

A

It means that all properties and services acquired by the business must be recorded at their original acquisition cost.

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16
Q

FULL DISCLOSURE PRINCIPLE

A

It states that all material facts that will significantly affect the financial statements must be indicated.

17
Q

MATCHING PRINCIPLE

A

It means that in a given accounting period, the revenue recorded should have its corresponding expense recorded, in order to show the true profit of the business.

18
Q

REVENUE RECOGNITION PRINCIPLE

A

Revenues are recognized as soon as goods have been sold (delivered to the customers) or service has been rendered, regardless of when the money is actually received.

19
Q

MATERIALITY PRINCIPLE

A

Business transactions that may affect the decision of a user of financial information are considered important or material, and thus, must be reported properly. Items of an insignificant
amount such as paper clips can be charged outright to expenses.

20
Q

THE ACCOUNTING EQUATION

A

Assets = Liabilities + Owner’s Equity