Chapter 1 Flashcards
Involves the preparation and distribution of accounting reports to potential users of accounting information.
Communicating
It is the formal component of accounting
Communication
Involves the assigning of monetary amounts to the accountable economic transactions and events
Measuring
It is the technical component of accounting
Measuring
It involves the routine and mechanical process of committing to write transactions and events on the books of accounts in a chronological sequence in accordance with established accounting rules and procedures.
Recording
Also known as journalizing
Recording
Involves the recognition or non-recognition of business activities as accountants events.
Identifying
Considered as the analytical component of accounting.
Identifying
Meaning of accounting that is defined by American Accounting Association (AAA)
Accounting is the process of identifying, measuring, and communicating economic information to permit informed judgement and decision by users of the information.
Meaning of accounting that is defined by Committee on Accounting Terminology of the American Institute of Certified Public Accountants (AICPA).
Accounting is an art of recording, classifying, and summarizing, in a significant manner in terms of money, transactions, and events in which are in part, at least, of a financial character and interpreting the results thereof.
Meaning of accounting that is defined by the Philippine Accounting Standards Council (ASC).
Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision.
The analytical component of accounting involves giving meanings to the amounts, ratios, trends and other information derived from the financial statements.
Interpreting
What is the title of Luca Pacioli’s book?
Summa de Arithmetica, Geometria, Propotioni et Proportionalita
(The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality or Everything about Arithmetic, Geometry and Proportion)
What are the primary users of information?
- Existing and potential investors
- Lenders and other creditors
Involves the sorting or grouping of similar items into their respective kinds. This is done through the process of posting the information from the journal to the ledger.
Classifying
What is a corporation with a single stockholder?
One Person Corporation (OPC)
Purchases raw materials, convert them into finished products and sell these finished products at a profit
Manufacturing
These business organizations are concerned with the buying and selling of goods in the same form.
Merchandising
The sole government agency mandated to register all types of cooperatives
Cooperative Development Authority
Are the parties to whom general purpose financial reports are primarily directed
Primary Users
International Accounting Standards Board (IASB) publishes its standards in a series of pronouncements called ________.
International Financial Reporting Standards (IFRS)
What is the law regulating the practice of accountancy in the Philippines?
RA No. 9298
It is a national organization of Certified Public Accountants (CPAs) in the Philippines
The Philippine Institute of Certified Public Accountants (PICPA)
By contract of partnership, two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.
Article 1767 of the New Civil Code
It represents the rules, procedures, practice and standards followed in the preparation and presentation of financial statements.
Generally Accepted Accounting Principles (GAAP)
The FRSC is composed of ____ members with a term of ____ years and is renewable for another term.
15 members, 3 years
It is formed by two or more persons who agreed to contribute money, property or industry into a common fund with the intention of dividing the profits among themselves
Partnership
It is an organization of CPAs who are employed in learning institutions and review centers as accounting professors or reviewers.
National Association of Certified Public Accountants in Education (nACPAE)
What is the meaning of BOA?
Board of Accountancy
4 Kinds of Business Organizations. Enumerate them
- Sole Proprietorship
- Partnership
- Corporation
- Cooperative
Corporation Code of the Philippines of 2008
RA 9520
What is the meaning of FINEX?
Financial Executives of the Philippines
It replaced the International Accounting Standards Committee (ASC)
International Accounting Standards Board
It is an organization of CPAs who perform auditing, taxation or management advisory agencies
Association of Certified Public Accountants in Public Practice (ACPAPP)
Revised corporation code of the Philippines
RA 11232
What is the meaning of SEC
Securities and Exchange Commission
The financial reporting standards council (FRSC) replaced _________ as the accounting standard body.
Accounting standards council (ASC)
It is the simplest form of business organization. It is owned by only one person who generally acts as the manager of the business.
Sole Proprietorship
They are concerned with the planting of crops or raising animals, and selling of their products either in raw or finished form at a profit.
Agriculture
It is the accounting standard setting body. Its main function is to establish and improve accounting standards that will be generally accepted in the Philippines
Financial Reporting Standards Council (FRSC)
It is an autonomous and duly registered association of persons with a common bond of interest, who have voluntarily joined together to achieve their social, economic and cultural needs and aspirations by making equitable contributions to the capital required…
Cooperative
Enumerate the “Other Users” of the financial information
- Employees
- Government and their agencies
- Customers
- Public
Financial statements may assist them by providing information about the trends and range of activities of organizations.
Public
It is an artificial being created by operation of law having the right of succession ant the powers, attributes and properties expressly authorized by law or incidental to its existence
Corporation
Business firms that render services to clients
Service concern
It formed part of the Philippine Financial Reporting Standards
International Financial Reporting Standards (IFRS)Other users about the continuance of the enterprise, especially when they have a long-term involvement with, or are dependent on the enterprise.
The Financial Reporting Standards Council issues its standards in series of pronouncements called _________ and ________.
Philippine Financial Reporting Standards (PFRS) and Philippine Accounting Standards (PAS)
Other users that are interested information about the stability and profitability of their employers so that they can assess the ability if the enterprise to provide remuneration, retirement benefits and employment opportunities
Employees
4 Types of Nature of Business
- Service Concern
- Manufacturing
- Merchandising
- Agriculture
What is the meaning of BSP?
Bangko Sentral ng Pilipinas
It is a hybrid between a partnership and a corporation. The company is taxed like partnership, has limited liability like a corporation but the investors have votes in proportion to their ownership interest
Limited Liability Company (LLC)
It is an organization of CPAs employed in private firms may become members of this sectoral organization
Association of Certified Public Accountants in Commerce and Industry
It is an organization of CPAs who are employed by the government
Government Association of Certified Public Accountants (GACPA)
Requires that assets should be recorded initially at original acquisition cost.
Cost Principle
A liability is recognized when it is probable that an outflow of resources embodying economic benefits will be required for the settlement of a present obligation and the amount of obligation can be measured reliably.
Liability Recognition Principle
Income should be recognized when earned rather than when cash is received
Income Recognition Principle
Income is recognized when earned regardless of when received and expense is recognized when incurred regardless of when paid.
Accrual
It is authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines
The Board of Accountancy
Enumerate the Examples of Accounting Principles
- Cost Principle
- Liability Recognition Principle
- Income Recognition Principle
- Matching Principle
- Accrual
Enumerate the Accountancy Profession
- Public Accounting
- Private Accounting
- Government Accounting
Accountants who render accounting services on a fee basis
Public accounting
Accountants employed by a particular business firm or not-for-profit organizations
Private Accounting
A large number of accountants are employed by the Commission of Audit, Bureau of Internal Revenue, Local Government Units or National Government.
Government Accounting
It repealed the Revised Accountancy Law (P.D. No. 692)
The Philippine Accountancy Act of 2004
Subjects that examination for CPA shall cover:
- Advanced Financial Accounting and Reporting (AFAR)
- Auditing
- Financial Accounting and Reporting (FAR)
- Management Advisory Services (MAS)
- Regulatory Framework for Business Transactions (RFBT)
- Taxation
To be qualified as having passed the licensure examination for accountants, a candidate must obtain a general average of 1.)_____ with no grades lower than 2.)_____ in any given subject.
1.) 75%
2.) 65%
Enumerate the International Examinations
- Certified Management Accountants (CMA) examinations
- Certified Accounting Technicians
- Certified Bookkeeper and Certified Cost Accountant
It is an international examination that is given to financial managers, executives or analysts who have at least 3 years of managerial or supervisory experience.
Certified Management Accountants (CMA) Examinations
It is an entry qualification in finance and accounting professions designed to equip the students with necessary skills at a technician level
Certified accounting technicians
Enumerate the Basic Professional Values and Ethics
- Integrity
- Objectivity
- Professional Competence and Due Care
- Confidentiality
- Professional Behavior
A professional accountant should be straightforward and honest in performing professional service
Integrity
A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgements
Objectivity
A professional accountant has a continuing duty to maintain professional knowledge and skill at the level required based on current developments in practice, legislation and techniques.
Professional Competence and Due Care
A professional accountant should not disclose any such information to third parties without proper and specific authority unless there is a legal professional right or duty to disclose
Confidentiality
A professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession
Professional Behavior
Enumerate the Specialized Accounting Field
- General or Financial Accounting
- Auditing
- Management Advisory Services or Management Accounting
- Tax Accounting
- Accounting System
- Government Accounting
- Accounting Education or Instruction
- Cost Accounting
This is concerned with the recording of transactions for an economic unit and the periodic preparation of reports
General or Financial Accounting
Established rules of accounting and are of great importance to financial accountants
Generally Accepted Accounting Principles (GAAP)
It is a field of activity involving an independent review of the accounting records and it is also an examination of financial statements
Auditing
Used generally to refer to services to clients and may employ historical and estimated data in assisting management in daily operations
Management Advisory Services
Application of appropriate techniques and concepts in processing the historical and projected economic data
Management Accounting
Includes the preparation of tax returns and determination of tax consequences of certain proposed business transactions
Tax Accounting
Concerned with the design and the implementation of procedures for the accumulation of financial data
Accounting System
Deals with the principles and procedures associated with accounting for national and local government
Government Accounting
Deals with the education of students of accounting principles, methods and their application
Accounting Education or Instruction
Emphasizes the determination and control costs particularly in manufacturing companies
Cost Accounting
Involves the preparation and presentation of financial statements using the GAAP as bases
Accounting
It is analytical because it involves the examination of financial statements to ascertain their conformity with the GAAP and its fairness of the presentation of financial statements
Auditing
It is the systematic and chronological recording of business transactions and events. It is referred to as recording phase of accounting
Bookkeeping
Basic notions or fundamental premises on which the accounting process is based. It served as the foundation or bedrock of accounting
Accounting assumptions
Enumerate the Accounting Assumptions or Postulates (4)
- Going concern or continuity
- Economic Entity or Accounting Entity
- Monetary Unit
- Time Period or Periodicity
Accounting entity is viewed as continuing in operation indefinitely
Going Concern or Continuity
The business is treated as a separate entity from that of its owners, managers, and employees who constitute the firm. It is an organization unit for which financial and economic data are gathered and processed.
Economic Entity or Accounting Entity
Requires entities to include in their accounting records only transactions data that can be measured in terms of money (quantifiable)
Monetary Unit
Concept between the preparation of financial statements for a specified time period
Time period or periodicity
Three types of accounting period:
- Calendar year
- Fiscal year
- Natural business year
A twelve-month period that starts January 1 and ends December 31
Calendar year
A twelve-month period that starts at any month of the year other than January and ends twelve months after the start period.
Fiscal Year
Is any twelve-month period that ends when business activities are at their lowest point
Natural Business Year
What is the law regulating the practice of accountancy in the Philippines?
The Philippine Accountancy Act of 2004 (R.A. 9298)
