Accounting and its environment Flashcards
Is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities that are intended to be useful in making economic decisions.
Accounting
Is the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information.
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
Accounting
Types of business:
- Services
- Trader
- Manufacture
- Raw Material
- Infrastructure
- Financial
- Insurance
TYPES OF BUSINESS
Hiring skilled staff and selling their time
Services
TYPES OF BUSINESS
Buying a range of raw materials and manufactured goods and consolidating them, making them available for sales in locations near to their customers or online for delivery
Trader
TYPES OF BUSINESS
Taking raw materials and using equipment and staff to convert them into finished goods
Manufacture
TYPES OF BUSINESS
Buying blocks of land and using them to provide raw materials
Raw materials
TYPES OF BUSINESS
Buying and operating assets (typically large assets); selling occupancy often in combination with service
Infrastructure
TYPES OF BUSINESS
Accepting cash from depositors and paying them interest; using the money to provide loans to borrowers, charging them fees and a higher rate of interest than the depositors receive
Financial
TYPES OF BUSINESS
Collecting of cash from many customers; investing the money to pay the losses experienced by few customers. By understanding the risk accepted and the likelihood of a claim paid
Insurance
Forms of business organization.
- Sole Propriertorship
- Partnership
- corporation
FORMS OF BUSINESS ORGANIZATIONS
This business organization has a single owner called the proprietor who generally is also the manager. The owner receives all profits, absorbs all losses, and is solely responsible for all debts of the business.
Sole Proprietorship
FORMS OF BUSINESS ORGANIZATIONS
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 profits among themselves.
Partnership
FORMS OF BUSINESS ORGANIZATIONS
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.
Corporation
MICRO, SMALL, AND MEDIUM ENTERPRISE
These enterprises are those with assets, before financing, of P3.0 (before P1.5 million or less and employ not more than nine workers.
Micro Enterprise
MICRO, SMALL, AND MEDIUM ENTERPRISE
An enterprise that has 10 to 99 workers.
Small Enterprise
MICRO, SMALL, AND MEDIUM ENTERPRISE
This enterprise has assets, before financing, of above P15 million to P100 million and employs 100 to 199 workers.
Medium Enterprise
ACTIVITIES IN BUSINESS ORGANIZATION
These activities obtain other resources used to produce goods and services. They compete for these resources in financial markets.
Financing Activities
ACTIVITIES IN BUSINESS ORGANIZATION
The methods an organization uses to obtain financial resources from financial markets and how it manages these resources.
Financing Activities
ACTIVITIES IN BUSINESS ORGANIZATION
Managers use capital from financing activities to acquire other resources, used in the transformation process that is, to transform resources from one form to a different form, which is more valuable, to meet the needs of the people having the right mix of resources is essential to efficient and effective operations.
Investing Activities
An ______ business is one that provides goods and services at low costs relative to their selling prices.
efficient
An _____ business is one that is successful in providing goods and services demanded by the customers.
effective
ACTIVITIES IN BUSINESS ORGANIZATION
It involves the use of resources to design, produce, distribute, and market goods and services. including research and development, design and engineering, purchasing, human resources, production, distribution, marketing, and selling services.
Operating Activities
PACIOLI’S DOUBLE-ENTRY BOOKKEEPING AND ITS EVOLUTION
Who is the father of accounting?
Fra Luca Pacioli
PACIOLI’S DOUBLE-ENTRY BOOKKEEPING AND ITS EVOLUTION
In Fra Luca Pacioli’s book, Summa, there are __ short chapters on bookkeeping.
36
PACIOLI’S DOUBLE-ENTRY BOOKKEEPING AND ITS EVOLUTION
Three essential things to be a successful merchant:
- Sufficient cash or credit;
- a good bookkeeper, and
- an accounting system
(to view the business affairs at a glance)
PACIOLI’S DOUBLE-ENTRY BOOKKEEPING AND ITS EVOLUTION
Three books that Pacioli discusses in the Summa:
- the memorandum,
- the journals, and
- the ledger.
PACIOLI’S DOUBLE-ENTRY BOOKKEEPING AND ITS EVOLUTION
In Pacioli’s book, he introduces the double entry accounting system in which for every _____ [should give] there exists a _____ [should have or should receive].
debet dare [should give]
debet habere [should have or should receive]
PACIOLI’S DOUBLE-ENTRY BOOKKEEPING AND ITS EVOLUTION
The book where all transactions are recorded, in the currency in which they are conducted, at the time they are conducted. Prepared in chronological order, is a narrative description of the business’s economic events.
Memorandum
PACIOLI’S DOUBLE-ENTRY BOOKKEEPING AND ITS EVOLUTION
This is the merchant’s private book. The entries made here are in one currency, in chronological order, and in narrative form.
Journal
PACIOLI’S DOUBLE-ENTRY BOOKKEEPING AND ITS EVOLUTION
Is an alphabetical listing of all the business’s accounts along with the running balance of each particular account.
Ledger
Fundamental concepts:
- Entity Concept
- Periodicity Concept
- Stable Monetary Unit Concept
- Going Concern
FUNDAMENTAL CONCEPTS
The most basic concept in accounting.
Entity Concept
FUNDAMENTAL CONCEPTS
This concept allows the users to obtain timely information to serve as a basis for making decisions about future activities. For the purpose of reporting to outsiders, one year is the usual accounting period.
Periodicity Concept
FUNDAMENTAL CONCEPT
It allows accountants to add and subtract peso amounts as though each peso has the same purchasing power as any other peso at any time. This is the basis for ignoring the effects of inflation in the accounting records.
Stable Monetary Unit Concept
FUNDAMENTAL CONCEPTS
It is assumed that the entity has neither the intention nor the need to enter liquidation or to cease trading. This assumption underlies the depreciation of assets over their useful lives.
Going Concern
CRITERIA FOR GENERAL ACCEPTANCE OF AN ACCOUNTING PRINCIPLES
A principle has ______ to the extent that it results in formation that is meaningful and useful to those who need to know something about a certain organization.
relevance
CRITERIA FOR GENERAL ACCEPTANCE OF AN ACCOUNTING PRINCIPLES
A principle has _____ to the extent that the resulting information is not influenced by the personal bias or judgment of those who furnish it. It connotes reliability and trustworthiness. It also connotes verifiability, which means that there is some way of finding out whether the information is correct.
Objectivity
CRITERIA FOR GENERAL ACCEPTANCE OF AN ACCOUNTING PRINCIPLES
A principle has ______ to the extent that it can be implemented without undue complexity or cost. These criteria often conflict with one another. In some cases, the most relevant solution may be the least objective and the least objective, and the least feasible.
feasibility
BRANCHES OF ACCOUNTING
Is the accountancy profession’s most significant service to the public.
Auditing
BRANCHES OF ACCOUNTING
-Auditing
An _____ is the independent examination that ensures the fairness and reliability of the reports that management submits to users outside the business entity.
external audit
BRANCHES OF ACCOUNTING
-Auditing
______ performs routine tasks and undertakes detailed checking of the company’s accounting procedures.
Internal auditors
BRANCHES OF ACCOUNTING
-Auditing
______ are likely to go in for much more selective testing.
External auditors
BRANCHES OF ACCOUNTING
Is a mechanical task involving the collection of basic financial data. The data are first entered in the accounting records or the books of accounts and then extracted, classified, and summarized in the form of an income statement, balance sheet, and cash flow statement.
Bookkeeping
BRANCHES OF ACCOUNTING
Is focused on the recording of business transactions and the periodic preparation of reports on financial position and results of operations.
Financial Accounting
BRANCHES OF ACCOUNTING
Is a relatively new branch of accounting that has grown rapidly over the last 30 years. Are responsible for setting financial objectives, making plans based on those objectives, obtaining the finance needed to achieve plans, and generally safeguarding all the financial resources of the entity.
Financial Management
BRANCHES OF ACCOUNTING
It incorporates cost accounting data and adapts them for specific decisions that management may be called upon to make. A system that incorporates all types of financial and non-financial information from a wide range of sources.
Management Accounting
BRANCHES OF ACCOUNTING
It includes the preparation of tax returns and consideration of the tax consequences of proposed business transactions or alternative courses of action.
Taxation/Tax accounting
BRANCHES OF ACCOUNTING
Is concerned with the identification of the sources and uses of resources consistent with the provisions of city, municipal, provincial or national laws.
Government Accounting
