fabm quiz Flashcards
1
Q
Deals primarily with the systematic method of recording and classifying financial transaction of business
Considered to be the procedural element of accounting as arithmetic is a procedural element of mathematics
Books are set up and prepared in a manner that ensures an orderly recording and classification of business transactions
A
Bookkeeping
2
Q
Systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting, and communicating financial information
A
Accounting
3
Q
AICPA
A
American Institute of Certified Public Accountant
4
Q
Basic Activities of Accounting
A
Identifying
Recording
Communicating
5
Q
Starting point of accounting process
Analyzing, classifying, interpreting, and measuring business transactions/events/activities that have an economic impact on a business
A
Identifying
6
Q
Done to provide a history of its financial activities
Keeping a systematic and chronological diary (journals and ledger) of events measured in peso
Clarifies and summarizes economic events
A
Recording
7
Q
Language of business in accounting
Presentation of financial statements to interested users
Used by decision-makers to be able to make a reasonable statement
A
Communicating
8
Q
Convey to management and/or interested outsider (s) the messages about the financial activities of the business
Considered as the principal accounting reports
A
Financial Statements
9
Q
Types of Financial Statements
A
Income Statement
Statement of Changes in Owner’s Equity
Statement of Financial Position
Statement of Cash Flows
Notes in Financial Statement
10
Q
Types of Financial Statement Sales & expenses
Performance of the business in terms of income and loss
A
Income Statement
11
Q
Types of Financial Statement
Investments/capital
A
Statement of Changes in Owner’s Equity
12
Q
Types of Financial Statement
Liabiites
A
Statement of Financial Position
13
Q
Types of Financial Statement
Money remaining; available cash
A
Statement of Cash Flows
14
Q
Types of Financial Statement
Adjusting entries
A
Notes in Financial Statement
15
Q
Inside the company
E.g. owners, employees, managers, shareholders, executives, etc.
A
Internal Users
16
Q
Outside the company
E.g. suppliers, investors, government, etc.
A
External Users
17
Q
Things of value that the company owns that have future benefits
E.g. cash, employees (not recorded)
A
Asset
18
Q
Continuous payment (UTANG)
A
Liabilities
19
Q
Money needed to start
A
Capital
20
Q
Kinds of Information Needed by Different Parties
A
Financial condition or position of the business
Financial performance or results of operations
Financial and investing activities:
21
Q
Amounts and kinds of assets and liabilities and status of the owner’s interest at a given point in time
A
Financial condition or position of the business
22
Q
Whether the business operating activities during a given period of time resulted in net income or a loss
A
Financial performance or results of operations
23
Q
Responsible for the changes in the financial resources of the business which ranges from the sources and applications of funds during a given period of time
A
Financial and investing activities:
24
Q
Nature of Accounting
A
Accounting is a service activity
Accounting is a process
Accounting is both an art and a discipline
Accounting deals with financial information and transactions
Accounting is an information system
25
Functions of Accounting!!!
Maintenance of systematic records
Communicating financial results of an entity
Meeting legal requirements
Protecting assets of a business
Assistance to management
26
Multifaceted discipline
Caters the diverse informational needs of stakeholders within and outside the organization
Accounting
27
Those who serve the general public and collection professional fees for their work
Public Accountants
28
Work for a single business, charitable organizations, educational institutions, and government-employed
Accountants of this type would also pursue a career in education and research
Private Accountants
29
Professional accountant who earns his title through a combination of education, qualifying experience, and an acceptance score in the written national examination given by the Board of Accountancy
Certified Public Accountants
30
Prepares, grades, and gives the results of the examination to the Professional Regulation Commission (PRC)
Board of Accountancy
31
Issues licenses that allow qualifying examinees to practice accounting as CPAs
Professional Regulation Commission
32
Who hires CPAs?
CPA firms that offer accounting services
Private companies
33
Branches or Fields of Accounting
Financial Accounting
Management Accounting
Government Accounting
Auditing
Tax Accounting
Cost Accounting
Accounting Education
Accounting Research
Environmental Accounting
Forensic Accounting
Information Technology Consulting
34
Keeps track of a company’s financial transactions
Financial Accounting
35
profession that involves partnering in management decision-making, devising, planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy
Management Accounting
36
Noncommercial accounting
Considers collection of taxes, computation of national income, fixing of gross national product (GNP) target, ascertaining the balance of payments, among others
Has its own accounting system in which budgets and encumbrances form parts if the accounts and assets which are restricted for specific purposes
Government Accounting
37
Review of the firm’s accounting system and financial statements to confirm that all these follow the Generally Accepted Accounting Principles (GAAP) and prescribed standards
Auditing
38
Focuses on tax matters
Includes all undertakings concerning tax computation, filing tax returns, and planning for future tax obligations
Tax Accounting
39
Costs incurred by the firm in accomplishing its objective or executing its various activities are collected, recorded, and classified
Cost Accounting
40
The task of the cost accountant includes:
1. Analyzing the costs of goods manufactured and sold, salaries and wages, overhead costs, among others
2. The data are then summarized and analyzed to compute the selling price of the products/services
3. These data are also utilized in cost control functions to know where savings are possible since cost accounting considers money as the economic factor of production
41
Preparation for a professional career in accountancy
Focuses on the idea of learners learning, and learning is done through different activities directed in gaining experience and expertise in preparation for a CPA career
Accounting Education
42
Responsible for the development and discovery of accounting concepts and practices
Conducted by both the accounting educators and practicing accountants
Utilizes evidences from different sources including financial data, experiments, or a computer simulation
Accounting Research
43
Helps a business enterprise to include the ecological and social impact of the company’s operation since the financial well-being of any given entity does not happen without proper strategic planning, which include environmental legislation and social reporting
Environmental Accounting
44
Analyzing various business records and presenting a report on these accounts to a court of law
Forensic Accounting
45
Implementing computer-based accounting system
Information Technology Consulting
46
Uses economic resources to provide goods or services to customers in exchange for money or other goods and services
Business Entity
47
Owned and managed by only one person
Sole Proprietorship
48
Formed and authorized by law to act as a single person although constituted by one or more people and legally endowed with various rights and duties
More popular form of a business organization today
Corporation
49
Association of two or more people who bind themselves together to do business for profit
Partners: People owning this form of business
Partnership
50
Owned and controlled by the same people who make use of the benefits from the services offered by the same entity
Members: People owing this form of association/organizations
Cooperative
51
Types of Business Based on Operation or Activity
Service Concern
Merchandising or Trading Concern
Manufacturing Concern
Other Concerns
52
Engaged in the rendering of services to others for a fee
Service Concern
53
Buying and selling of goods or commodities
Buying finished goods which are ready for sale
Merchandising or Trading Concern
54
Processing of products or the conversion of raw materials into finished goods that are then sold
Produces or manufactures the goods
Manufacturing Concern
55
Utilizes natural resources
Other Concerns
56
history of accounting
Cradle of Civilization 3600 BC
14th Century
French Revolution
Industrial Revolution
19th Century
Present
57
Record-keeping was already common in Mesopotamia, China, and India which is evident from “clay tablets” that contain commercial transactions, such as listing of accounts receivable and accounts payable
The Cradle of Civilization
58
Dissemination of double-entry bookkeeping by Luca Pacioli or “
14th Century
59
Type of accounting/bookkeeping system which is recorded using debit and credit – debits and credits should always be equal to balance the book
Double Entry Bookkeeping
60
The thorough study of accounting and development of accounting theory began during this period
Social upheavals affecting government, finances, laws, customs, and business had greatly influenced the development of accounting
French Revolution 1700s
61
Mass production and the great importance of fixed assets were given attention during this period
Industrial Revolution
62
The modern, formal accounting profession emerged in Scotland in 1854 when Queen Victoria granted a Royal Charter to the Institute of Accountants in Glasgow, creating the profession of Chartered Accountant (CA)
The beginnings of Accounting in Europe and America 19th century
63
One company takes over all the operations of another business entity resulting in the dissolution of another business
merger
64
Development of modern accounting standards and commerce
Accounting profession in the 20th century developed around state requirements for financial statement audits
Present 20th Century
65
GOALS OF EXTERNAL USERS
1. To buy or sell the shares of the entity
2. To loan money to the entity
3. To have sales or purchase transactions with the entity
4. To impose taxes
66
external users examples
POTENTIAL INVESTORS
CREDITORS
CUSTOMERS
TAXING AUTHORITIES
GOVERNMENT REGULATION AGENCIES
NON-PROFIT ORGANIZATION
INDEPENDENT/EXTERNAL AUDITORS
67
use financial reports in evaluating what income they can reasonably expect from their investment.
POTENTIAL INVESTORS
68
This group includes money lenders, suppliers, and other trade creditors. Potential lenders or current creditors determine the borrower’s ability to meet scheduled payments.
CREDITORS
69
This group interested in information about the continuance of an enterprise, especially when they have a long-term involvement with or are dependent on the company’s offerings either in the form of goods or services.
CUSTOMERS
70
Local or national government levy taxes on individuals and businesses. The amount of the tax is determined using accounting information.
TAXING AUTHORITIES
71
Most organizations face government regulation. For example, the Securities and Exchange Commission (SEC) requires businesses to disclose certain financial information to the public. The SEC, like many government agencies, bases its regulatory activity I part on the accounting information it receives from firms.
GOVERNMENT REGULATION AGENCIES
72
which operator for purposes other than to earn a profit, use accounting information in much the same way that profit-oriented businesses do.
NON-PROFIT ORGANIZATION
73
The government regulatory agencies like the BIR and SEC require corporations or companies to have their financial statements audited by independent/external auditors. The audited financial statements are attested to present fairly the financial position and performance of the organization, from which other users tend to rely upon
INDEPENDENT/EXTERNAL AUDITORS
74
GOAL OF INTERNAL USERS
1. To analyze the profitability by products and operational units
2. To decide the need for cash flows to support the operations
3. To decide whether or not to buy or sell business segments
4. To decide whether or not to build new production facilities
75
EXAMPLES OF INTERNAL USERS
OWNERS
MANAGEMENT
EMPLOYEE
INTERNAL AUDITORS
76
provides the money/capital that the business needs to begin operations. Through the financial reports, the owner can properly manage and monitor the business, analyzing whether or not he/she can expect reasonable return from his/her investment.
OWNERS
77
use accounting information to set goals for the organization, to evaluate the progress made toward those goals, and to take corrective action, if necessary.
MANAGEMENT
78
The - that made up the workforce of the company will be interested in information about the stability and profitability of the company. Through the financial statements, - will be able to assess the ability of the enterprise to provide remuneration, retirement benefits, and other - opportunities and benefits. - and labor unions may make wage demands based on the accounting information that shows their - reported income.
EMPLOYEE
79
spot-check transactions and ensures that proper internal controls we designed and implemented by the company. They report directly to the Board of Directors to ensure their independence in the conduct of their internal audit activities. They are internal users of accounting information because they are also hired employees or contracted professionals.
INTERNAL AUDITORS
80
ACCOUNTING ASSUMPTIONS
Entity Concept
Going concern concept
Time period concept
Monetary unit concept
Accrual concept
Consistency concept
81
For accounting purposes, an entity is the organizational unit for which accounting records are maintained (e.g., Joseph General Merchandising). the business is regarded as having a separate and distinct personality from that of the owner/s generating its own revenue incurring Its own expenses, owning its own assets, and owing its own liabilities (Smith, Keith, et al., 1993). This means that the personal transactions of the business.
ENTITY CONCEPT
82
assumes that the company is going to be a continuing business for an indefinite period of time, that is, the company will not close shop and will neither sell nor liquidate its assets in the immediate or foreseeable future.
GOING CONCERN ASSUMPTION
83
it divides the life of the business in regular intervals (usually one year) at the end of which financial statements are prepared.
TIME PERIOD or PERIODICITY CONCEPT
84
This is a twelve-month period beginning on January 1 and ending on December 31.
Calendar year.
85
. is marked and recognized by the year on which it ends. So, if a business follows the April to March financial cycle, then for the financial year 2022, the fiscal year begins on April 01, 2021, and ends on March 31, 2022.
Fiscal year
86
Business activities are measured in - units and expressed in - units, for example, Philippine pesos, when they are recorded. Thus, any non-financial or non-monetary information must not be recorded in the accounting books, but must be noted in the form of a memorandum; and, if necessary for disclosure, be included as part of the notes to the financial statements.
MONETARY UNIT ASSUMPTIONS
87
This concept requires that income be recorded when earned regardless whether cash is received. And an expense be recognized when incurred (e.g., when services or benefits have already been received) regardless whether payment is made. To apply the accrual concept, accountants have developed the accrual accounting. The accrual method of accounting attempts to record the financial effects on a company of transactions and other events and circumstances in the periods in which those transactions, events, and circumstances occur rather than only the periods in which cash is received or paid by the firm. This means that accrual accounting consists of all techniques developed by accountants to apply both the accrual and matching concepts (Needlers, Powers, et al., 19999).
ACCRUAL CONCEPT
88
This principle requires accounting procedures in a consistent manner, that is, not subject to change from time to time. The greatest benefit that can be derived from adherence to this principle is the reliability of the results when a comparison between the financial information in one accounting period and the financial information in another accounting period is made.
CONSISTENCY PRINCIPLE
89
ACCOUNTING PRINCIPLES
Cost Principle
Revenue Recognition concept
Matching principle
Objectivity principle
Materiality concept
Disclosure Concept
Conservatism Concept
90
this term refers to the amount of money spent in the acquisition of an asset. It is neither its prevailing market value nor its future value.
COST PRINCIPLE or HISTORICAL COST PRINCIPLE
91
is the inflow of assets that results from producing goods or rendering services. - is not earned all at one point in time. Instead, the earning process extends over a considerable length of time. The - realization concept provides that income is recognized when earned regardless whether cash is received.
REVENUE RECOGNITION CONCEPT
92
simply states that there should be matching between expenses and revenues. For this reason, most companies use accrual accounting, not cash accounting. Under the accrual basis, revenues are recorded when they are earned, not when they are paid, whereas expenses are recorded when they are incurred, not when they are paid.
MATCHING PRINCIPLE
93
requires that the recording of business transactions be done independently and rendered without bias and prejudice. It also requires proper documentation of the transactions recorded. For example, an official receipt is evidence of receipt of cash payment; a sales invoice is proof of a sales transaction or a petty cash voucher is a document to show an expense of a minimal amount.
OBJECTIVITY PRINCIPLE
94
refers to the relative importance of an item or event. An item/ event is considered material if knowledge of it would influence the decision of prudent users of financial statements.
MATERIALITY CONCEPT
95
This concept has a powerful influence in valuing assets and measuring net income. When faced which uncertainties, the accountant traditionally leans towards the direction of caution, choosing the method that would give the business a less favorable financial condition and lowers net income
CONSERVATISM or PRUDENCE CONCEPT
95
All relevant and material events affecting the financial condition/position of a business and the result of its operation must be communicated to users of financial statements. We must remember that the purpose of accounting is to provide information that is useful to decision-makers. So, naturally, if there is accounting information not included in the primary financial statements that would benefit users, said information should be provided too.
DISCLOSURE CONCEPT
