PRELIMS Flashcards
1
Q
Explain Accounting
A
language of the business
2
Q
differentiate economic entity to business entity
A
economic entity is both non profit and profit oriented while business is only profit oriented
3
Q
what ere the phases or functions of accounting, explain each
A
recording, business transactions
classifying, sorting or grouping accounts
summarizing, preparing reports
interpreting, analytical function
4
Q
explain the two users of accounting information
A
internal users make decisions directly affecting the internal operations of a business while
external users make decisions concerning their relationship to the enterprise
5
Q
give examples on each two users of accounting information
A
internal users, corporate board of directors, employees, management
external users, investors, government agencies, creditors and suppliers
6
Q
differentiate the three forms of business
A
sole proprietorship is own by one individual (proprietor)
partnership is owned by two or more individuals (partners)
corporation is owned by stockholders
7
Q
selling people’s time
A
service operation
8
Q
buying and selling product
A
trader/merchandise operation
9
Q
designing products, aggregating components and assembling finished products
A
manufacturing
10
Q
growing or extracting raw materials
A
raw materials production
11
Q
selling the utilization of infrastracture
A
infrastructure
12
Q
receiving deposits, lending and investing money
A
financial operations
13
Q
pooling premiums of many to meet claims of a few
A
insurance
14
Q
what are the branches of accounting
A
auditing, bookkeeping, government accounting, financial accounting, management accounting, taxation/tax accounting
15
Q
what is auditing
A
ensures the fairness and reliability of the reports that the management submits to users
16
Q
what is bookkeeping
A
collecting financial data, recording business transactions, and preparing financial statements
17
Q
what is government accounting
A
concerned with the identification of the sources and uses of resources
18
Q
what is financial accounting
A
focused on the recording of business transactions and the periodic preparation of financial reports
19
Q
what is management accounting
A
incorporates cost accounting data and adopts them for specific decisions
20
Q
what is taxation or tax accounting
A
preparation of tax returns and the consideration of the tax consequences of proposed transactions
21
Q
what is the accounting guidelines
A
gaap or generally accepted accounting principles
22
Q
what are the gaap criterias, explain each
A
relevant, useful info
objectivity, not influenced by personal bias
feasibility, practical
23
Q
what are the fundamental accounting concepts
A
entity concept, periodicity concept, stable monetary unit concept, going concerns
24
Q
what are the basic accounting principles
A
objectivity principle, historical cost, revenue recognition principle, expense recognition principle, adequate disclosure, materiality, consistency principle, matching principle
25
an organization that stands apart from other organizations as a separate economic unit
entity concept
26
divides the life of an entity to equal time periods, allows users to obtain timely data
periodicity concept
27
treats peso amounts as though each peso has the same purchasing power as any other peso
stable monetary unit concept
28
financial statements are prepared on the assumption that the business will continue to operate in the future, entity has neither the intention nor the need to enter liquidation or to cease trading
going concern
29
based on the most reliable data available so that they will be accurate and useful
objectivity principle
30
acquired assets should be recorded at their actual cost and not at what management thinks they are worth as at reporting date
historical cost
31
revenue is recognized in the accounting period when goods are delivered or services are rendered or performed
revenue recognition principle
32
expenses is recognized in which goods and services are used up to produce revenue and not when the entity pays for those goods and services
expenses recognition principle
33
requires that all the relevant information that would affect the user's understanding be disclosed
adequate disclosure
34
financial reporting is only concerned with information that is significant enough to affect evaluations and decisions
materiality
35
firms should use the same accounting method from period to period to achieve comparability over time
consistency principle
36
gaap encompasses three things
conventions, rules, and procedures
37
it s a service activity whose function is to provide quantitative information, about economic entities that is intended to be useful in making economic decisions
accounting
38
what are the two qualitative characteristics of financial information
relevance and faithful representation
39
provides raw materials
raw materials production
40
take raw materials and produces them into goods
manufacturing
41
the given information to provide a meaningful and useful result
relevant
42
it is not influenced by the personal bias or judgments of those who provides it
objectivity
43
feasibility
the principle is practical
44
what are the components of faithful representation, explain each
completeness, all events are presented
neutrality, free from bias
freedom, free from error
45
what are the enhancing qualitative charateristic
comparability, consistency, verifiability, timeliness, understandability, cost and benefit analysis of financial reporting
46
in this concept, the inflation are being ignored
stable monetary unit concept
47
define the fundamental principles of the accounting profession
```
integrity, straightforward an honest
objectivity, not allowing bias
professional competence and due care, maintain professional knowledge
confidentiality
professional behavior
```
48
what is the objective of accounting standards
it is to develop a uniform set of high quality, understandable and enforceable global accounting standards
49
IASB means
international accounting standards boards
50
FRSC means
financial reporting standards council
51
it was created to assist the boa to carry out its function and power
FRSC or financial reporting standards council
52
what is RA 9298 or the Philippine accountancy act of 2004
it is the creating of FRSC to assist the BOA to carry out the functions and power
53
what are the Philippine regulatory evidence
BIR, LGU, PICPA, SEC, DBM, BSP
54
it ensure compliance of national taxes
bureau of internal revenue BIR
55
it ensures payment of local business taxes
local government taxes LGU
56
it is to regulate the information to all kinds of corporation, non profit or profit
security and exchange commission SEC
57
it undertakes the formulation of the annual national budget and ensures the appropriate prioritization and allocation of funds
department of budget and management DBM
58
it is to regulate all the operations of all banks and business import and export activities
bangko sentral ng pilipinas BSP
59
it is to protect the credibility of cpa certificates
philippine institute of certified public accountants PICPA
60
what are the financial statements
balance sheet, income statement, statement of changes in owners equity, statement of cash flows
61
what is statement of financial performance
it is the result of operation or the income statement
62
what is statement of financial position
it is the financial condition or position
63
it is the owners capital or the additional investment, net loss or net income
statement of changes in the owners equity
64
it summarizes the cash receipts and cash disbursements
statement of cash flows
65
what are the elements of financial position
assets, liabilities, and owners equity
66
what are the elements of financial performance
income and expenses
67
it is the economic resources owned by the business that is expected for future gain
assets
68
what are the elements of assets
control, past events, and future economic benefits
69
what is the normal accounting period
one year
70
what is liability
it is the obligations to pay, debt and claims of the creditors
71
what are the elements of liability
present obligations and outflow of economic benefits
72
what is owner's equity
assets - liabilities = equity
73
what is income and expenses
income is +A -L +E
| expense is -A +L -E
74
what are the measurement bases of elements of financial statements
measurement, historical cost, current cost, realizable value, settlement value, present value
75
determining the elements which are to be recognized and carried in the balance sheet
measurements
76
fair value of consideration given to acquire them
historical cost
77
what is current cost
paid if the same or an equivalent asset was acquired currently
78
what is realizable value
obtained by selling an asset in an orderly disposal
79
what is settlement value
expected to be paid to satisfy the liabilities in the normal cost of business
80
what is present value
presented discount value of the future net cash flows that the item is expected to generate in the normal course of business
81
it is the identification or brief description of items that fall under the same kind, class or nature
account titles
82
what are the account titles the fall under the assets of financial position
current assets: cash, cash equivalents, petty cash funds, notes receivable, accounts receivable, accrued income, allowance for uncollectible debts or bad debts, advances to employees, prepaid expenses, unused supplies
non current assets: ppe, land, building, machinery and equipment, furniture and fixtures, accumulated depreciation, intangible assets
83
it is the average period of time required for a business to make an initial outlay
normal operating cycle
84
it is the money, either in paper or in coins and money substitutes
cash
85
it is the highly liquid assets that are readily convertible in cash
cash equivalents
86
what is the risk of cash equivalents
changes in values because of changes in interest rates
87
what is petty cash funds
these are the funds that are set aside for small expenses
88
what is notes receivable
a promissory note that is received by the business from the customer
89
what is accounts receivable
it is an oral or verbal promise to pay by a customer or client
90
it is the asset offset or contra assets that shows deduction from the accounts receivable which is a current asset account
allowance for uncollectible accounts or doubtful act or bad debt
91
what is accrued income
income earned but are not yet collected
92
amount collectibles from employees for allowing to make cash advances which are deductible against their salaries and wages
advances to employees
93
what is prepaid expenses
expenses that are prepaid in advance but are not yet incurred or expired
94
what is unused supplies
cost of stationery purchased for use left on hand and still unused
95
what are the non current assets
ppe, land, building, machinery and equipment, furniture and fixtures, accumulated depreciation, and intangible assets
96
tangible asset for use in production or supply of goods and are expected to be used more than one period
property plan and equipment
97
the site where the building used as office or store is constructed
land
98
a finished construction where operations and transactions took place
buildings
99
differentiate machinery and equipment to furniture and fixtures
machinery and equipment are tools used in making products while
furniture and fixtures are tools used in helping or giving service to people
100
it is a contra asset called valuation account which is a deduction from ppe
accumulated depreciation
101
what are the depreciable assets or fixed assets
all except land
102
these are the non monetary assets without physical assets
intangible assets
103
what are the account titles that falls under the current liabilities of liability
account payable, notes payable, accrued expenses, unearned income
104
an oral or verbal promise to pay by the business
accounts payable
105
a promissory note issued by the enterprise
notes payable
106
expenses incurred by the enterprise but are not yet paid
accrued expenses
107
what is unearned income
income collected but not yet considered as earned
108
what are the two non current liabiliies
notes payable and mortgage payable
109
it requires a fixed or tangible property to be pledged as collateral to ensure payment
mortgage payable
110
what are the account titles that falls under the income or revenues
service income, professional income, rental income. interest income
111
what are the account titles that falls under the expense
supplies expenses, rent expenses, repairs and maintenance, salaries expense, uncollectible accounts, depreciation expense, taxes and licenses, insurance expense, utilities expense
112
what is the accounting equation
assets = liabilities + equity
113
what is the normal balance of assets
debit
114
what is the normal balance of liability
credit
115
normal balance of equity or capital
credit
116
normal balance of expense
debit
117
normal balance of income
credit
118
normal balance of withdrawal
debit
119
what is service income
all types of income from rendering services
120
professional income
by professionals earned by their practice of their profession
121
rental income
income earned by the buildings
122
interest income
income received from an amount of money borrowed
123
supplies expense
cost of supplies
124
rent expense
amount paid or incurred for use of property
125
repairs and maintenance
expenses incurred in repairing or servicing the building
126
salaries expense
compensation given to employees by the business
127
uncollectible accounts
the anticipated loss that the business may incur
128
depreciation expenses
portion of the cost of ppe or fixed assets that has expired
129
taxes and licenses
amount paid for business permits
130
insurance expense
the expired portion of the insurance premium paid
131
utilities expense
for telephones, water, light bills
