FABM Chapter 4 Reviewer Flashcards
Financial statements are prepared on the assumption that the
the entity will continue in operation into the foreseeable future
without the need or intention to stop the operation
The Going Concern Concept
If there is significant doubt that the business will continue in
operations (“____________”), the going concern
the assumption is forgone and financial statements will be
prepared under a Terminating concern basis
Going concern problem
Presents financial information regarding an
entity
Accounting
Can be a business, a person, an organization
or the government.
An entity
Is a separate accounting entity from its
owners
A business
In preparing financial reports about the business,
transactions of the ________ are excluded.
Owners
The owner and the business are two separate and distinct parties
The accounting Entity Concept
Transfer of goods from the main office to an outlet or
the branch shall be treated as part of the _______
Same Business
In accounting means that a company
uses financial reporting based on its own chosen periods.
The periodicity concept
This is an equal time period called the “_________” over
which the financial performance and financial condition of the
business are accounted for and reported to users of the
financial statements.
Accounting Period
Reporting period can either be a _____________
Calendar Year or Fiscal Year
The presumed indefinite life of the business is broken into distinct equal time periods called “accounting period’ over which the financial performance and financial condition of the
business are accounted for and reported to users of the financial statements.
Periodicity Assumption
Income is recorded in the accounting period they are earned regardless of when they are collected whereas expenses are recorded in the period incurred regardless of when they are paid.
The accrual method
An income that is already earned but is not yet
collected
Accrued Income
An expense that is already incurred but not yet been paid
Accrued Expense
An income that is already received but not yet earned
Deferred Income
An expense that is already paid but not yet incurred
Prepaid Expense
Only financial transactions are recorded and reported in terms of money such as the
Peso.
The monetary or measurement concept
Non-financial information is not recorded but information relevant to users of financial statements is noted via a memo entry in the books.
Memo entry in the books.
Income is recognized when it is realized or earned. Income is said to be realized when one of the contracting party performed his obligation on the contract, and thus have established a right to demand from the other party.
Realization Concept
Ownership to the goods transfers to the buyer at the moment the goods leave the premises of the seller
Free on Board (FOB) shipping point+
Ownership to the goods transfers to the buyer upon arrival at the warehouse of the buyer
FOB Destination
Relates to the timing of recognition of an expense.
The matching Concept
These are expenditures that benefit future accounting periods. These are recorded in accounting as assets.
Capital Expenditures
