ACCOUNTING

65問 • 1年前

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is the excess of revenue realized against expenses and losses incurred during a particular period. Net loss is the excess of expenses and losses against realized revenue.

Profit/Net income

is the money that comes in during a business's regular activities. The key aspect of ___ is that it comes from ordinary business operations. For example, if a business sells groceries, the money it earns from selling those products is considered ___

revenue

represents other items that meet the definition of income and may or may not arise in the course of the ordinary activities of an entity. it usually arise from the disposal of noncurrent assets like land, building, machinery, or equipment s

gains

are reductions in economic benefits over an accounting period. They occur when assets are used up, liabilities are incurred, or equity decreases, excluding distributions to equity participants.

expenses

represent other items that meet the definition of expenses and may or may not arise in the course of ordinary activities of a business concern. it includes those resulting from disaster such as fire and flood as well as those arising from disposal of non current assets.

losses

is an association of persons with common bond and interest, and who have voluntarily joined together to achieve a lawful common social or economic end.

cooperative

is a business entity organized under the laws of the Philippines.

Domestic corporation

is a business concern organized under the laws of foreign countries but operating in the Philippines.

foreign organizations

sells services to customers. The primary source of income comes from the services rendered to customers. are classified as nonprofessional service entity and professional service entity.

service concern

business entity is engaged in the buying and selling of products or goods. This business concern does not change or alter the form of the product purchased. In other words, no conversion process takes place from the time the product is purchased from the supplier up to the time it is sold to the ultimate consumer.

merchandising

is a producer of goods or products. It is engaged in buying raw materials and supplies for processing into finished products. The salient feature of this business is the conversion process that takes place from the time the material is purchased up to the time it is sold as a finished product. In other words, the product being sold is not in the same form as when it was purchased.

manufacturing

business possesses the nature and characteristics of two types of business entities. Restaurant and fast-food chain are classified as ___businesses since their very nature is to process and sell food items, and at the same time provide excellent service to customers. They have the attributes of a manufacturing business and a service concern.

hybrid business

"Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions."

Financial Reporting Standards Council (FRSC)

"Accounting is 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 financial in character, and interpreting the results thereof."

American Institute of Certified Public Accounting (AICPA)

shortest definition of accounting.

language of business

The final product of the accounting process is called the ____business is "talking" through the ____; hence, accounting is considered as the language of business.

finacial statements

The mechanical phase of accounting includes

recording, classifying, and summarizing,

interpreting of accounting is considered as

analytical phase

refers to the routine and mechanical process of writing down business transaction

recording

is considered as the book of original entry; hence, all business transactions are recorded in the __ for the first time.

journal

called the book of final entry. It is in the ___ where the transactions recorded in the journal are classified.

ledger

refers to the process of sorting or grouping similar businesstransactions and events into their respective kinds or classes. In other words, similar transactions and events should be grouped together.

classifying

The process of transferring the same information from the journal to the ledger is technically known as

posting

is the phase in the accounting process which involves preparation of the financial statements.

summarizing

It is not a mechanical function, but rather an analytical function. ___ refers to the process of analyzing and evaluating the information presented in the face of the financial statements and the accompanying notes.

interpreting

refers to the ability of the business to realize more revenues than expenses. This Information is reflected in the income statement.

profitability

refers to the ability of the business to pay its current maturing obligations or those obligations that are payable within one year.

liquidity

refers to the ability of the business to pay its long-term financial obligations and remain stable. Long-term obligations are those payables of the business that mature beyond one year from the date of the financial statements.

stability

reflects how effective and efficient the management is in utilizing its resources. Resources like cash, products intended for sale, building, land, and other similar resources are entrusted to the management. The resources are expected to grow through effective and efficient management.

management efficiency

-refers to the recording aspect of the accounting process or cycle. -the chronological recording of business transactions and events in the books of accounts. It includes the preparation of trial balance.

book keeping

has a wider scope and involves not only the recording aspect but also the preparation and interpretation of financial statements.

accounting

He is considered as the father of accounting. Although the book outlined the principles of mathematics, it included a set of accounting principles

Luca Pacioli

The set of rules, procedures, assumptions, postulates, and concepts followed in recording business transactions and events, and in the preparation of general-purpose financial statements is called

Generally Accepted Accounting Principles (GAAP).

considered the foundation of generally accepted accounting principles; they serve as the bedrock of all other accounting.. Without these, there can be no uniformity in the practice of accounting which may result in a distorted and meaningless financial statement.

accounting assumptions

known as continuity principle, assumes that the business is going to operate or will continue to exist for an indefinite period. The entity is assumed not to liquidate or curtail materially the scale of its operations. There are two salient features, namely: 1. the business is assumed to have indefinite life; and 2. the business in not going to liquidate

Going Concern Assumption

This means that assets are recorded at their original cost rather than their potential selling price because the business is expected to continue functioning, and there's uncertainty about when it might cease operations. For instance, companies like San Miguel Corporation or Metro Bank and Trust Company are assumed to operate indefinitely, but no one can accurately predict if or when they might stop operating.

Business is assumed to have indefinite life

involves selling off assets to settle financial obligations, and if a company is unable to continue operating, its assets are valued based on their selling price rather than their original cost.

Business is not assumed to liquidate

dictates that the business is treated as a person with personality separate and distinct from the owner or owners.

entity assumption

means that all business transactions and items in financial statements should be expressed in Philippine peso.

quantifiability aspect

accounting assumes that the Philippine peso maintains a constant value, meaning its purchasing power remains consistent regardless of inflation or currenct fluctuations. Accounting focuses solely on the face value of the peso, disregarding changes in its purchasing power.

stability aspect

transactions are recorded whenever they happen, notwithstanding the inflow or outflow of cash. In other words, under this basis of accounting, business transactions and events are recognized when they occur, and not as when cash or its equivalent is received or paid. The business transactions are recorded in the accounting records and reported in the financial statements in the periods to which they relate.

Accrual Basis

transactions are recorded only when cash is involved

cash basis

refer to the different attributes that make the information provided in the financial statements useful to users.

qualitative characteristics

means that the information provided in financial statements should help users make economic decisions.

relevance

means that information should accurately reflect the transactions and events it's supposed to represent. This includes reporting all relevant details without holding back anything that could mislead users. For example, a balance sheet should accurately show the assets, liabilities, and equity of the entity at the reporting date, while an income statement should include all realized and incurred items, regardless of whether they're favorable or not.

faithful representation

Financial statements are considered comparable when they allow users to assess accounting information by comparing it with data from similar companies and industry averages

Comparability

Financial statements need to be easily understood to be useful to users. This means that the notes accompanying the financial statements should use simple language that most people can understand. Avoid using fancy words or overly complex phrases when explaining items or transactions.

understandability

means that different measurers agree on the value of items in financial statements when using the same methods. For example, if three independent measurers agree on the value of machinery using similar methods, it's highly verifiable.

Verfiability

If information is reported too late, it may lose its usefulness. decision-makers need financial and relevant data promptly to make timely decisions. Delayed information may not be effective when finally received. Thus, financial information should be provided promptly.

timeliness

To accurately represent transactions, it's essential to account for them based on their actual economic impact, not just their legal status. This means prioritizing the economic reality over legal technicalities.

substance over form

means being cautious when making estimates in uncertain situations. It involves understating liabilities or expenses and overstating assets or income to avoid overestimating the business's worth. For example, if a flood damages inventory worth P300,000, but only P200,000 is reported as losses, it overstates assets and understates losses, which boosts capital.

prudence or conservatism

ccurate data. Reliable business transactions are backed by supporting documents, which can come from within the company or externally. Internal documents include payroll records, purchase orders, and attendance sheets, while external ones include official receipts and bank statements.

objectivity principle

assets should be initially recognized at their acquisition cost. This cost includes the purchase price and any additional expenses directly related to the acquisition, such as freight, insurance, installation, and testing costs necessary for its use

cost principle

an accounting approach used to value assets and liabilities based on their current market value. It involves determining the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

fair value method

says that financial statements should only contain important information.

materiality principle

. It says expenses should match the revenues earned in the same period.

matching principle

it's important to apply the same accounting methods and procedures from one period to another. This allows users to compare the business's performance over time. Changing accounting methods is discouraged because it makes it difficult for users to evaluate performance.

consistency principle

The financial statements need to include all relevant accounting information that affects the decisions of various users. Details about each item, how they're valued, and the accounting methods used should be explained in the notes. If there are different options for how something is done, the chosen method should be disclosed

adequate disclosure principle

process of determining the monetary amounts at which the elements of the financial statements are to be recognized and carried in the balance sheet and income statement.

measurement

means recording assets at the price paid in the past or the value exchanged during acquisition. It's about capturing the cash or its equivalent spent when the asset was acquired

historical cost

Under this approach, assets are valued at the cash needed to buy them now, while liabilities are valued at the cash required to settle them immediately. This means assets are assessed at their current replacement price, and liabilities at their full payment amount.

current cost

Under this approach, assets in the financial statement are valued at the cash they would fetch if sold right now. Liabilities are listed at the full amount owed, which is what's expected to be paid to settle them. In simpler terms, assets are valued based on what they can be sold for, and liabilities are listed at what needs to be paid.

realizable value

assets are listed at today's discounted value of their expected future cash earnings. Liabilities are listed at today's discounted value of the future cash payments needed to settle them

present value

The business is "talking" through the it is the final product of the accounting process

financial statements

The dollar standard is used to gauge the peso's current purchasing power, where, for instance, if the exchange rate is US $1 to 50, then one peso equals 5 cents. Despite daily fluctuations in the peso's value compared to the US dollar, accounting doesn't recognize these changes in business transactions. This principle is also known as the

monetary convention or stable monetary unit

Reed finals

Leah Jean Better · 28問 · 2年前

Reed finals