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BA 99.1 > Accounting In Action > Flashcards

Accounting In Action Flashcards

1
Q

3 basic activities of accounting

A

identifying, recording, communicating

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2
Q

What is identifying

A
  • identifying economic events relevant to its business
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3
Q

What is recording

A

relevant economic events are recorded in order to provide a history of financial activities

  • it is the act of keeping a SYSTEMATIC CHRONOLOGICAL DIARY OF EVENTS that are measured in monetary units
  • economic events are also CLASSIFIED and SUMMARIZED in the recording process
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4
Q

What is communicating

A

COMMUNICATES the collected information to interested users by means of ACCOUNTING REPORTS

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5
Q

2 vital elements in communicating economic events — explain

A

Analysis
- involves ratios, percentages, graphs, and charts to highlight significant financial trends and relationships

Interpretation
- explaining the uses, meaning, and limitations of reported data

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6
Q

What is bookkeeping

A

ONLY part of the recording process because it ONLY RECORDS ECONOMIC EVENTS

  • part of only ONE accounting process
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7
Q

Who uses accounting data?

A
  1. Internal users

2. External users

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8
Q

Define internal users of accounting information

A

MANAGERS who plan, organize, and RUN the businesses

  • marketing managers, production supervisors, finance directors, company officers
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9
Q

Define external users of accounting information

A

individuals and organizations OUTSIDE a company who want financial information about the company

  • do not participate in the day to day operations of the business
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10
Q

What is managerial accounting?

A
  • part of internal users

- provides internal reports to help users make decisions about their companies

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11
Q

Give examples of external users

A 
owners
creditors
investors
supplies
customers
BIR
audit
tax authorities
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12
Q

What is financial accounting?

A
  • part of external users

- provides economic and financial information for investors, creditors, and other external users

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13
Q

2 measurement principles of IFRS

A

Historical cost and fair value

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14
Q

Define fair value

A

assets and liabilities are reported at fair values (price received to sell an asset or settle a liability)

commonly used where assets are actively traded

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15
Q

define historical cost principle

A
  • companies record assets at their COST

- what is in its accounting records is continued to be reported at that same amount

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16
Q

2 main assumptions that provide foundation for the accounting process

A

Monetary unit and economic entity assumption

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17
Q

define monetary unit assumption

A

companies only record events that can be measured in money

the only thing included in accounting records are transaction data that can be expressed in money terms/ QUANTIFIABLE UNITS only

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18
Q

define economic entity assumption

A

ACTIVITIES of the entity is KEPT SEPARATE from the activities of its owners and all other economic entities

owner’s activities is kept separate from the company

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19
Q

what is the basic accounting equation?

A

assets = liability + owner’s equity

20
Q

what is the expanded accounting equation

A

assets = liabilities + owner’s capital - owner’s drawings + revenues - expenses

21
Q

define assets

A
  • resources a business owns
  • capacity to provide = FUTURE services or BENEFITS
  • items that contain service potential or future economic benefit that eventually results in cash inflow
22
Q

define LIABILITIES

A
  • claims AGAINST assets
  • BORROWED CAPITAL
  • existing debts and obligations
  • ACCOUNTS PAYABLE
  • NOTES PAYABLE
  • SALARIES AND WAGS PAYABLE
  • SALES AND REAL ESTATE TAXES PAYABLES
  • creditors = person/entities owed by the business -> yung inutangan
23
Q

define OWNER’S EQUITY

A
  • INVESTED CAPITAL
  • ownership claim on total assets
  • capital invested by proprietors, partnerships, and shareholders
24
Q

what is owner’s equity equal to

A

assets - total liabilities

25
Q

what causes an INCREASE in owner’s equity

A
  • investments by owner (owner’s capital)
  • increase in revenues

increase in revenue increase owner’s equity
increase in revenue increases assets
increase in revenue decreases liabilities

26
Q

what causes a DECREASE in owner’s equity

A

drawings - withdrawing cash for personal use

expenses - decrease in equity that results from operating the business -> cost of assets that are consumed/services used in the process of earning revenue

27
Q

what is the effect of expenses

A

a decrease in equity results in a decrease in assets or an increase in liability

28
Q

expanded equation

A

assets = liabilities + (owners capital- owners drawings) + (revenues - expenses)

29
Q

enumerate the accounting cycle

A
  1. journalizing
  2. posting
  3. trial balance
  4. adjusting entries
  5. adjusted trial balance
  6. financial statements
  7. closing statements
  8. post-closing trial balance
30
Q

define accounting transaction

A

business’ economic events that are recorded by accountants

31
Q

2 types of accounting transactions

A

external & internal transaction

32
Q

define external transaction

A

economic events between the company and an OUTSIDE enterprise

ex. purchase of cooking equipments from a supplier, payment of monthly rent to a landlord

33
Q

define internal transaction

A

economic events that occur entirely WITHIN the company

34
Q

examples of NON-BUSINESS /accounting transactions

A

hiring employees
responding to emails
engaging with customers
placing merchandise orders

35
Q

effect of an investment in cash by owner

A

increase in OE, increase in assets

36
Q

effect of purchase of equipment by cash

A

increase, decrease in asset

increase in equipment account
decrease in cash account

37
Q

effect of purchase of supplies on credit

A

increase in assets, increase in liabilities

38
Q

effect of services performed for cash

A

increase in asset (cash account)

increase in owner’s equity (revenue account)

39
Q

purchase of advertising on credit

A

increase in liabilities

decrease in owner’s equity (expenses account)

40
Q

services performed for cash and credit

A

increase in assets (cash account and accounts receivable)

increase in owner’s equity (revenue account)

41
Q

effect of payment expenses

A

decrease in cash (assets)

decrease in owner’s equity (increase in expenses)

42
Q

effect of payment on accounts payable

A

decrease in liabilities

decrease in assets (cash account)

43
Q

effect of receipt of cash ON ACCOUNT

A

increase in cash (assets)

decrease in accounts receivable (assets)

44
Q

effect of withdrawal of cash by owner

A

decrease in cash (decrease in asset)

increase in owner’s drawings (decrease in OE)

45
Q

what does an income statement present

A

revenues and expenses resulting in net income or net loss for a specific PERIOD of time

46
Q

what does a statement of financial position report

A

assets, liabilities, and owner’s equity at a SPECIFIC date

BA 99.1 (7 decks)

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