INTRODUCTION TO ACCT(ACCT PLUS) Flashcards
is broadly speaking, a system that helps businesses track events that affect them.
This process involves IDENTIFYING the events that affect a business, RECORDING these events , and COMMUNICATING the SUMMARIZED results of all events within a particular period to interested parties.
ACCOUNTING
*Identifying
*Recording
*Summarizing
ACCOUNTING PROCESS
*the starting point of accounting process.
*the identification of economic events relevant to a business.
IDENTIFYING
Example of relevant economic event
- sale of Toyota cars (as mentioned)
-Provision of services by a hospital
-Payment to supplies
-Purchase of equipment for the manufacturing of Bench shirts.
To be identified a relevant economic event, there should be ______
a transfer of things with value
Normally, for the purchase of equipment, ____ or ____ is exchanged for the equipment.
cash or money
both have value making the purchase a relevant economic event.
The cash and equipment
is the next step of accounting process. After the company identifies the relevant economic events, it records those events which will serve as the history of its financial activities.
RECORDING
Recording event should be done ____ and _____ for easier tracking and interpretation
systematically and chronologically
Finally, after a lapse of a specific period (usually one year), companies summarize all the recorded economic events into accounting reports.
SUMMARIZING
the most popular accounting reports.
Financial statement
The basic features of accounting are follows:
-Accounting is a process.
-Accounting is an art
-Accounting deals with financial information and transactions
-Accounting is a means and not an end.
-Accounting is an information system.
it performs the function of identifying, recording and communicating economic events with the end goal of providing information to internal and external parties.
Accounting is a process.
Art refers to a way of performing something. It entails creativity and skills to help us attain some objectives.
Accounting is a combination of techniques and its application requires applied skills and expertise.
Accounting is an art.
Accounting deals only with quantifiable financial transactions. These are the only events identified by the accountant, recorded in the books, and communicated to different parties
. Accounting deals with financial information and transactions
Non financial transactions are not the focus of the accounting process. However, non-financial data may be used to interpret and better estimate some financial data.
Accounting deals with financial information and transactions
As mentioned earlier, accounting is a tool to achieved specific objectives. It is not the objective itself. Imagine that you dream to Paris someday. Accounting can be thought of as the plane that will bring you to your destination.
Accounting is a means and not an end.
Accounting is recognized and characterized as a storehouse of information. As a service function, it collects processes and communicates financial information of any entity
Accounting is an information system.
the ________________ defines accounting as “the process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by the users of information.”
American Accounting Association (AAA)
The _____________________ defines accounting as “the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof.”
American Institute of Certified Public Accountants(AICPA)
From the foregoing definitions, the main function of accounting can be summarized as follows:
-Keeping systematic record of business transactions
-Protecting properties of the business
-Communicating results to various parties in or connected with the business.
-Meeting legal requirements
T or F
It is believed that the history of accounting is thousand of years and can even be traced to ancient civilizations
T
T or F ( History)
During those times people doesn’t have a system.
During those times people followed a system of writing and counting money.
Augustus prepared a _________ which listed the public revenues, the amount of cash in the aerarium (treasury), in the provincial fisci (tax officials), and in the hand of publicani (public contractors); which attested by Tacitus’ statement that it was written out by Augustus himself (Oldrord1995)
rationarium (account)
rationarium
(account)
aerarium
(treasury)
publicani
(public contractors)
acknowledge as the Father of modern accounting
Luca Pacioli
is the first book printed with a treatise on bookkeeping.
Luca Pacioli’s Summa de Arithmetica, geometria, Proportioni et Proportionalita(Review of Arithmetic, Geometry, Ratio, and Proportion)
- is the system being used to this very day.
- debit and credit used for each transaction
Double entry bookkeeping system
At present times, accounting standards are already available to guide accountants in their practice of the profession. Some of this standards include
PFRS ( Philippine Financial Reporting Standard) and
PAS (Philippine Accounting Standards)
is the recording of financial transactions and events, either manually or electronically.
Bookkeeping
Accounting is much more. It includes _____________ business events and transactions, and helps information users to make economic decisions.
identifying, measuring, recording, reporting and analyzing
Financial accounting practice is governed by concepts and rules known as___
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Affects the decision of its users.
Relevant Information
Is trusted by users.
Reliable Information
Is helpful in contrasting organizations.
Comparable Information
is the private group that sets both broad and specific principles.
Financial Accounting Standards Board
is the government group that establishes reporting requirements for companies that issue stock to the public.
Securities and Exchange Commission
a business is accounted for separately from other business entities, including its owner.
Business Entity Principle
Some of known business entity forms are:
Proprietorship
Partnership
Corporation
Is the concept behind providing financial accounting information about the economic activities of an enterprise for specified time periods. For reporting purposes, one year is usually considered as one accounting period.
PERIODICITY
Classification of Accounting Period
Calendar year
Fiscal year
a twelve month period starts on January 1 and ends on December 31
Calendar year
a twelve month period starts on any months of the year other than January.
Fiscal year
Reflects assumption that the business will continue operating instead of being closed or sold.
The assets are reported at cost but not reported at liquidation value that assume closure.
Going-Concern Principle
BASIC PRINCIPLES
Objectivity Principle
Historical Cost
Adequate Disclosure
Accrual Principles
Materiality
Consistency
– states that all business transactions that will be entered in the accounting records must be duly supported by verifiable evidences.
Objectivity Principle
means that all properties and services acquired by the business must be recorded at its original cost.
Historical Cost
states that all material facts that will significantly affect the financial statements must be indicated.
Adequate Disclosure
- states that income should be recognized at the time it is earned such as goods are delivered or services have been rendered. Likewise, expenses should be recognized at the time they are incurred.
Accrual Principles
means that financial reporting is only concerned with information significant enough to affect decisions.
Materiality
use of the same accounting method from period to period to achieve comparability over time within a single enterprise.
Consistency
