FAR Flashcards
______ helps decision makers make informed choices regarding the allocation of scarce resources under control.
Information
Language of Business
Accounting
a system that measures business activities, processes that information into reports and communicates the result to decision makers.
Accounting
Accounting is a _____ activity. Its function is to provide quantitative information primarily financial in nature, about economic entities that is intended to be useful i making economic decisions.
service
Accounting id an _____ ___ that measures, process, and communicates financial information about an economic entity.
information system
Accounting is the ___ of recording, classifying, and summarizing in a significant manners and in terms of money and transactions, and events etc.
art
Inventor of double entry bookkeeping.
Amatino Manucci
He The Model Chart of Accounts
Eugen Schmalenbach
Forms of Business Organizations: (3)
Single Proprietorship
Partnership
Corporation
Forms of Business Organizations:
This business organization has a single owner. Often small service-type. Solely responsible for all debts of the business
Single Proprietorship
The owner of a single proprietorship is called:
Proprietor
Forms of Business Organizations:
It is owned and operated by two or more persons who bind themselves to contribute money, property, to a common fund with the intent of dividing the profits
Partnership
Forms of Business Organizations:
In here both are liable for any debt incurred by the business.
Partnership
Forms of Business Organizations:
It is an artificial being created by operation of law, having the rights of succession and power, attributes and properties expressly…
Corporation
The owner of a corporation is called:
stockholders
Forms of Business Organizations:
The owners are not personally liable for the company’s debts
Corporation
Provides goods and services at low costs relative to their selling prices
Efficient
Successful in providing goods and services demanded by the customers.
Effective
It is the use of resources to design, produce, distribute, and market goods and services.
Operating Activities
It is the method an organization uses to obtain financial r sources from financial markets and how it manages theses resources.
Financing Activities
Primary sources of financing:
owner and creditor; banks and suppliers
Managers use capital from financing activities to acquire other resources used in the transformation process- transform resources from one form to different form which is more valuable.
Investing Activities
It serves as medium of exchange and a measure of value
Money
Economic activities of business.
Business transactions
Before the effects of transactions can be recorded they must be ______.
measured
______ reduces the effects of numerous transactions into useful groups or categories.
Classification
_______ of financial data is achieved through the preparation of financial statements.
Summarization
the ______ is the book where all transactions are recorded.
Memorandum
Also known as the merchants private book.
Journal
Alphabetical listing of all the business accounts along with the running balance of each particular account
Ledger
In every debet dare there exist a debet habere.
Double entry
Transactions of different entities should not be accounted for together. Each entity should be evaluated separately.
Entity Concept
An entity’s life can be meaningfully subdivided into equal time periods for reporting purposes.
Periodicity Concept
The usual accounting period
1 year
The Philippine peso id a reasonable unit of measure and that’s its purchasing power is relatively stable. It allows accountants to add and subtract peso amounts ad though each peso has same purchasing power as any other peso at any time.
Stable Monetary Unit Concept
The assumption that the entity is a ____ and will continue operation for the foreseeable future. Hence it is assumed that the entity has neither the intention nor the need to enter liquidation or to cease trading.
Going Concern
To the extent that results in information is meaningful and useful to those who need to know something about a certain organization.
Relevance
To the extent that the resulting information is not influenced by personal bias or judgement of those who furnish it. Connoted reliability and trustworthiness.
Objectivity
To the extent that it can be implemented without undue complexity or cost.
Feasibility
Accounting records and statements are based on the most reliable data available do that they will be as accurate and as useful as possible.
Objectivity Principle
This principle states that acquired assets should be recorded at their actual cost and not what management think they are worth as at reporting date.
Historical Cost
Revenue is to be recognized when goods are delivered or services are rendered or performed.
Revenue Recognition Principle
Expense should be recognized when goods and services used up to produce revenue not when the entity pays for those goods and services.
Expense Recognition Principle
This principle requires that all relevant information that would affect the users understand and assessment of the accounting entity be disclosed in the financial statements.
Adequate Disclosure
In this principle; financial reporting is only concerned with information that is significant enough to affect evaluations and decisions.
Materiality
In this principle the entity should use the same accounting method from period to period to achieve comparability over time within a single enterprise.
Consistency Principle
Accrued income is an asset account.
True
items that have been initially recorded as liabilities but are expected to become income over time through the operations of the business.
Unearned Income
A financial statement showing the revenue and expense for a fiscal period.
Income Statement
Accounts receivable represents receivables supported by a oral or informal promise to pay.
True
There are income items that have been earned but bot have been recorded and paid by the customer.
Accrued Income
Accrued expense is an expense account.
True
Contains the results of the company’s operations for a specific period of time.
Statement of Comprehensive Income
Prepaid expense is an expense account.
False
This statement provides an analysis of inflows and outflows of cash from or to operating, investing, and financing activities.
Statement if Cash Flows
Temporary accounts begin each new fiscal period with a ___ balance.
zero
items of expenses that have been incurred but not have been recorded and paid.
Accrued Expense
This statement includes the amounts of the company’s total ass t, liabilities, and owner’s equity which in totality provided financial position of the company.
Balance Sheet or Statement of Financial Position
Is a method of allocating the cost of an asset to an expense over the accounting periods that make up the assets useful life.
Depreciation
Unearned revenue is an _____ account.
liability
An account with a normal credit balance is increased by debiting it.
False
Freight out is an expense.
True
This is the process of transferring amounts from journals to ledgers.
Posting
are items that have been initially recorded as assets but are expected to become expenses over time or through operations of the business.
Prepaid Expense
Normal balance of expense account.
Debit
Normal balance of income or revenue.
Credit
Normal balance of liability.
Credit
Normal balance of assets.
Debit
A credit balance in an asset account is considered as an abnormal balance.
True
The book of original entries.
Journal
Tis is used to document disbursement process.
Check Vouchers
Accrued income is an asset account.
True
It is concerned with right and wrong and how conduct should be judged to br good or bad
Ethics
A situation in which there is no obvious right or wrong decision rather right or right answer.
Ethical Dilemma
Refers to going to the authorities or the media with proof that a company is engaged in wrong doing.
Whistle Blowing
It arise when a person must play two conflicting roles in a situation.
Conflict of interest
It is the independent examination that ensures fairness and reliability of the reports that management submits to users outside the business entity.
External Audit
Is a mechanical task involving collection of basic financial data.
Bookkeeping
It is the process that involves recording of cost data in books of accounts. It makes use of those data once they have been extracted from the cost books in providing information for managerial planning and control.
Cost Accounting
It is focused on recording business transactions and the periodic preparation of reports on financial position and results of operations.
Financial Accounting
It is responsible for setting financial objects, making plans based on those objectives, obtaining the finance needed to achieve plans, and generally safeguarding all the financial resources of the entity.
Financial Management
Incorporates cost accounting data and adapts them for specific decisions which management may be called upon to make.
Management Accounting
It is concerned with the identification of the sources and uses of resources consistent with the provisions of city, municipal, provincial or national laws.
Government Accounting
Personal financial activities of the owners of a business are not recorded in the books of the business.
Entity Concept
Accounting is a process of recording, ______, analyzing,_______, and reporting of financial information to the stakeholders of the business.
Summarizing, Interpreting
Transactions are recorded based on reliable and verifiable information.
Objectivity Principle
The personal liability of a partner is limited to the amount of his investment.
False
A separate legal entity organized in accordance with codes and laws in which ownership is divided into shares of stocks is referred to as corporation.
True
The _____ assumes that the business has na indefinite economic life
Going Concern
Limited Liability
Corporation
GAAP
Generally Accepted Accounting Principle
End users who use hardware and software to solve information-related and decision-making problems.
People
These are the manuals and guidelines that instruct end users on how to use the software and hardware.
Procedures
Another name for programs-instructions that tell the computer how to process data.
Software
Two kinds of software:
System Software
Application Software
Types of Applications Software
Basic and Advanced Applications
Background software that helps a compute manage its internal resources. Example is operating systems like Windows and Linux
System Software
A software that performs useful work on general-purpose problems.
Application Software
Electronic circuity e. g CPU and memory.
System Unit
It translate data and programs that human can understand into a form the computer can process. e. g keyboard, mouse, scanner, digital camera, microphone
Input devices
output processed information from the CPU. e. g monitor and printer
Output devices
These send and receive data and programs from one computer to another
Communication devices
Raw material for data processing. It consist of numbers, letters, and symbols and related to facts, events, and transactions.
Data
Collection of characters organized as a single unit.
File
It specifies the policies and procedures to be followed in accumulating information within the accounting information system.
Accounting Manual
It generates reliable financial information needed by the decision makers in a timely manner
Accounting Information System
Present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits.
Asset
Increase in assets; decrease in liabilities
Income
Decreases in asset; increase in liabilities
Expenses
A present obligation of the entity to transfer an economic resource as a result of past events.
Liability
Residual interest in the assets of the entity after deducting all its liabilities.
Equity
Decrease in asset
Credit
Increase in Income
Credit
Decrease in income
Debit
