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AE 111 > Chapter 1 to Chapter 4 > Flashcards

Chapter 1 to Chapter 4 Flashcards

1
Q

What is accounting according to AICPA?

A

Accounting is the art of recording, classifying, summarizing in a significant manner and in terms of money, transactions, and events which are in part of or at least a financial character, and interpreting the results thereof.

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2
Q

What are the 3 components of accounting?

A

Identifying (Analytical component)
Measuring (Technical component)
Communicating (Formal component)

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3
Q

When can a business activity be considered as accountable or worth recognizing?

A

When it is for a sum of money or if it has an effect in assets, liabilities, and equity.

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4
Q

What is the very purpose/main objective of accounting?

A

To provide quantitative information that will be useful for making economic decisions.

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5
Q

These are economic activities of an entity.

A

Transactions

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6
Q

Differentiate external transactions from internal transactions.

A

External transactions are business activities involving itself and another entity, while internal transactions involve only one entity.

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7
Q

This is the process by which resources are transformed into products.

A

Production

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8
Q

This is any sudden and anticipated loss from fire, flood, earthquake, and other event ordinarily termed as an act of God.

A

Casualty

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9
Q

This is the accounting process that recognizes accountable events from non-accountable events.

A

Identifying

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10
Q

This is the accounting process of assigning of peso amounts to the accountable economic transactions and events.

A

Measuring

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11
Q

What are the measurement bases of monetary amounts?

A

Historical cost
current value

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12
Q

Differentiate historical cost from current value.

A

Historical cost is the original acquisition cost and the most common measure of financial transactions while current value includes fair value, value in use, fulfillment value and current cost.

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12
Q

This is the process of preparing and distributing accounting reports to potential users.

A

Communicating

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12
Q

This is the process of systemically maintaining a record of all economic business transactions after they have been identified and measured.

A

Recording or journalizing

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13
Q

This is the sorting or grouping of similar and interrelated economic transactions into their respective classes.

A

Classifying

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14
Q

How is the classifying stage accomplished?

A

by posting to the ledger

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15
Q

This is a group of accounts which are systemically categories into asset accounts, liability accounts, equity accounts, expense accounts, and revenue accounts.

A

Ledger

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16
Q

This is the preparation of financial statements.

A

Summarizing

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17
Q

What law regulates the practice of accountancy in the Philippines.

A

RA 9298 or the Philippine Accountancy Act of 2004

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18
Q

This is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.

A

Board of Accountancy

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19
Q

When is the Philippine CPA examination offered?

A

Twice a year, once in May and once in October

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20
Q

Who are the primary users of accounting information?

A

Investors and creditors

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21
Q

What are the main fields of practice of accountancy?

A

Private practice
Public practice
Government
Education

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22
Q

This field of accounting renders independent and expert financial services to the public.

A

Public accounting

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23
Q

What are the services offered in public accounting?

A

Auditing, taxation, and management advisory services

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24
Q

This is the examination of financial statements by independent CPAs for the purpose of expressing an opinion as to the fairness with which the financial statements are prepared.

A

Auditing

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25
Q

This service includes the preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors.

A

Taxation service

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26
Q

This service includes maintaining the records, producing the financial reports, preparing the budgets and controlling and allocating the resources of the entity.

A

Private accounting

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27
Q

This service encompasses transactions involving the receipt and disposition of government funds and property.

A

Government accounting

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28
Q

This is the acquisition of advanced knowledge, skill, and proficiency.

A

Continuing Professional Development

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29
Q

What are CPD credit units?

A

These are CPD credit hours required for the renewal of CPA license every 3 years.

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30
Q

How many CPD credits units are required for the renewal of CPA license?

A

15

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31
Q

How many CPD credit units are needed for the accreditation of a CPA to practice the accountancy profession.

A

120

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32
Q

Differentiate the work of an accountant and an auditor.

A

The accountant analyzes the economic transactions and summarizes them into financial statements that the auditor will examine.

33
Q

What is bookkeeping?

A

It is the maintaining and keeping of accounting records.

34
Q

Explain: Accounting vs Accountancy

A

Accounting is the field of accountancy while accountancy is the profession.

35
Q

Explain: Financial accounting vs managerial accounting

A

Financial accounting focus on financial statements while managerial accounting is the preparation of financial reports for internal users only.

36
Q

These represent the rules and standards followed in the preparation and presentation of financial statements.

A

GAAP

37
Q

How many members are there in the FRSC?

A

15 members with a chairman and 14 representatives.

38
Q

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

A

Conceptual Framework

39
Q

Who are the others users of accounting information?

A

Employees, customers, government, agencies, and the public

40
Q

This is information about the entity’s economic resources and the claims against the reporting entity.

A

Financial report

41
Q

The financial position can help users to assess an entity’s performance including

A

Liquidity, solvency, financial structure, and financial flexibility

42
Q

This is the availability of cash in the near future to cover currently maturing obligations.

A

Liquidity

43
Q

This is the availability of cash over a long term to meet financial commitments when they fall due.

A

Solvency

44
Q

This means that income is recognized when earned regardless when received and expense is recognized when incurred regardless of when paid.

A

Accrual accounting

45
Q

These are the qualities or attributes that make financial accounting information useful to the users.

A

Qualitative characteristics

46
Q

What are the two fundamental qualitative characteristics?

A

Relevance and Faithful representation

47
Q

What are the two types of qualitative characteristics?

A

Fundamental characteristics and enhancing characteristics

48
Q

This is the capacity of the information to influence a decision.

A

Relevance

49
Q

When does a financial information have a predictive value?

A

If it can be used as an input to processes employed by uses to predict future outcome.

50
Q

When does a financial information have confirmatory value?

A

If it provides feedback about previous evaluations/If it can be used by users to confirm or correct earlier expectations.

51
Q

What are the 3 characteristics under relevance?

A

Materiality
Predictive Value
Confirmatory or Feedback Value

52
Q

What is materiality also known as?

A

Doctrine of convenience

53
Q

This dictates that strict adherence to GAAP is not required when the items are not significant enough to affect the evaluation, decision and fairness of the financial statements.

A

Materiality

54
Q

This means that the presentation of financial information not readily understood or not clearly expressed.

A

Obscuring information

55
Q

This means that financial reports represent economic phenomena or transactions in words and numbers.

A

Faithful representation

56
Q

What are the ingredients of faithful representation?

A

Free from error
Completeness
Neutrality

57
Q

This characteristic requires that relevant information should be presented in a way that facilitates understanding and avoids erroneous implication.

A

Completeness

58
Q

In order for financial statements to be complete, what should they be accompanied with?

A

Notes to financial statements

59
Q

This standard means that all significant and relevant information leading to the preparation of financial statements shall be clearly reported.

A

Standard of adequate disclosure

60
Q

This means depicting without bias in the preparation and presentation o financial information.

A

Neutrality

61
Q

This is the exercise of care and caution when dealing with the uncertainties in the measurement process such that assets or income are not overstated and liabilities are not understated

A

Prudence

62
Q

This means “in case of doubt, record any loss and do not record any gain.”

A

Conservatism

63
Q

This is recognized as a provision if the loss is probable and the amount can be reliably measured.

A

Contingent loss

64
Q

This is not recognized but disclosed only.

A

Contingent gain

65
Q

This means that there are no errors or omissions in the description of the phenomenon or transaction.

A

Free from error

66
Q

This arises when monetary amounts in financial reports cannot be observed directly and must be estimated.

A

Measurement uncertainty

67
Q

This type of qualitative characteristics relate to the presentation or form of the financial information.

A

Enhancing qualitative characteristics

68
Q

What are the characteristics under enhancing qualitative characteristics?

A

Verifiability
Comparability
Understandability
Timeliness

69
Q

This means the ability to bring together for purpose of noting points of likeness and difference.

A

Comparability

70
Q

This is comparability within an entity.

A

Intracomparability or horizon comparability

71
Q

This is comparability across entities.

A

Intercomparability or dimensional comparability.

72
Q

This is the use of the same method between and across entities within an entity.

A

Consistency

73
Q

This is the use of the same method between and across entities in the same industry.

A

Comparability

74
Q

This requires that financial informations must be comprehensible or intelligible if it is to be most useful.

A

Understandability

75
Q

This means that different knowledgeable and independent observers could reach consensus, although now necessarily complete agreement, that a particular depiction is a faithful representation.

A

Verifiability

76
Q

Financial information must be supported by this to be verifiable.

A

Evidence

77
Q

This means verifying an amount or other representation through direct observation.

A

Direct verification

78
Q

This means checking the inputs to a model, formula or other technique and recalculating the inputs using the same methodology.

A

Indirect verification

79
Q

This means that financial information must be available or communicated early enough when a decision is to be made.

A

Timeliness

80
Q

These are the basic notions or fundamental premises on which the accounting process is based.

A

Accounting assumptions

81
Q

This assumption means that in the absence of evidence to the contrary, the accounting entity is viewed as continuing in operation indefinitely.

A

Going concern

82
Q
A

AE 111 (5 decks)

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