CHAPTER 1: Introduction to Accounting and Business Flashcards
(138 cards)
1
Q
Process of receiving money, planning and allocating it according to one’s needs.
A
Budgeting
2
Q
Equal to Revenue – Expenses
A
PROFIT OR NET INCOME
3
Q
Represents your wealth or finance which is made up of properties or assets.
A
NET WORTH
4
Q
______ make up NET WORTH, while _______ decrease it.
A
- Assets
- Liabilities
5
Q
BUSINESS ACUMEN
A
skill + gut feeling + luck
6
Q
$ RECEIVED > $ PAID =
A
Profit
7
Q
first part of the accounting process
A
BOOKKEEPING or RECORD MAKING
8
Q
Accounting will help you to
A
- Track down business activities,
- Analyze, calculate (measure) and record these activities, and
- Prepare progress reports
9
Q
starts with record keeping but with emphasis on proper preparation and presentation of FINANCIAL REPORTS.
A
FINANCIAL ACCOUNTING AND REPORTING
10
Q
Interpretation of financial reports.
A
FINANCIAL ANALYSIS
11
Q
SIX 6 MOST IMPORTANT ACCTG. TERMS
A
- assets
- liabilities
- net worth
- revenues
- expense
- profit
12
Q
FIVE 5 ACCTG. AREA:
A
- budgeting
- bookkeeping
- financial accounting and reporting
- financial analysis
- resource controls
13
Q
GENERAL PURPOSE FINANCIAL STATEMENTS
A
- Statement of Financial Position or Balance Sheet
- Income Statement or Statement of Financial Performance
- Statement of Cash Flows
- Statement of Owner’s Net Worth
14
Q
progress report showing list of assets and liabilities
A
Statement of Financial Position or Balance Sheet
15
Q
report of revenues against cost and expense
A
Income Statement or Statement of Financial Performance
16
Q
report where we got and where we used money.
A
Statement of Cash Flows
17
Q
report showing change in owner’s wealth.
A
Statement of Owner’s Net Worth
18
Q
analyzes transactions and makes a record of the assets, liabilities, revenues, and expenses of the business.
A
FINANCIAL ACCOUNTING AND REPORTING
19
Q
Principal Objective of FAR
A
a. proper preparation of various financial reports and their disclosure requirements.
b. proper planning, evaluation and control of the financial resources of the business
20
Q
EARLIEST records of BOOKKEEPING were in _______.
A
Babylonia and EGYPT
21
Q
Use of Bookkeeping in Babylonia and Egypt Before
A
- to keep track of pyramids and palaces being constructed
- record was kept of the number of slaves who worked for Kings and Pharaohs, number of materials and days it took for the work to be finished.
22
Q
introduced bookkeeping in the Philippines
A
TENEDOR DE LIBRO
23
Q
first mercantile book
A
LIBRO DE LARTE DELA MERCATURA
24
Q
A Ragusan merchant who write the Libro De Larte Dela Mercatura in 1458
A
Benedetto Cotrugli
25
double-entry recording system
SUMMA DE ARITMETIKA
26
Writer of SUMMA DE ARITMETIKA in 1494
Fr. Luca Pacioli
27
economic unit that buys and sells goods or services.
Business
28
Major concern of businesses
how best to use its resources (machines, raw materials, labor skills, and number of men to employ)
29
Most often success is measured in terms of
PROFIT and INCREASE IN FUNDS.
30
Primary motive of a business
PROFIT.
31
Profit generates more
RESOURCES
32
PRIMARY SOURCE OF CAPITAL
Owner or Investor
33
getting back what was invested
RETURN OF CAPITAL
34
receiving more than the amount invested
RETURN ON CAPITAL
35
element of uncertainty in an outcome
RISK
36
Secondary Source of Capital
relative, friend or a micro finance provider such as a bank or a cooperative
37
It helps low- income Filipino entrepreneurs fund their projects. (Ex. Tulay sa Pag-unlad Inc., BPI Globe Banko, and the Rural Bank of the Philippines)
Micro Finance Programs
38
Organizes, manages, and takes the risk of putting up a business.
Entrepreneur or owner-manager
39
Set-up and managed by one person. Most small businesses.
SOLE PROPREITORSHIP
40
Advantages of SOLE PROPREITORSHIP
- needs small start-up capital
- easy to manage
- owner gets all the profit
- easy to form/make
41
Disadvantages of SOLE PROPREITORSHIP
- difficult to expand
- no indefinite life
- unlimited liability
42
Two or more persons. Usually consultancy firms
PARTNERSHIP
43
Advantages of PARTNERSHIP
- easy to manage
- management is more efficient
44
Disdvantages of PARTNERSHIP
- no indefinite life
- unlimited liability
45
Separate legal entity. An investor buys shares of stocks and become shareholders. Controlled by BOARD OF DIRECTORS.
CORPORATION
46
Laws affecting corporate organization
RA 11232 February 2019
47
Advantages of CORPORATION
- there’s more capital
- able to hire experts
- perpetual existence
- more stable
- higher profits
- one-man corporation is allowed
48
Disadvantages of CORPORATION
- has no unlimited liability
- higher risk on corporate debts
- more legal and tax regulations
- abuse of power by board of directors
49
Provides service for a fee
Service Business
50
buys and sells foods or merchandise
Merchandising Business
51
buys RAW materials, processes it into FINISHED GOODS, and sells it to customers.
Manufacturing Business
52
owner’s equity (capital) + non-current liabilities
Financing Activities
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non-current assets (PPEs)
Investing Activities
54
current assets and current liabilities
Operating Activities
55
getting things done by using resources and directing people as efficiently as possible to be able to accomplish the goals of the business.
Management
56
THREE 3 OBJECTIVES OF A MANAGER
a. that resources are being used productively,
b. customers are satisfied with the product or service, and
c. business is generating adequate profit
57
Management must be
EFFICIENT AND EFFECTIVE
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resource inputs are being used at the least time, effort, and cost to produce resource outputs.
EFFICIENT
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able to attain its goals in terms of being able to produce and sell the required number of products or services given a specific level of quality.
EFFECTIVE
60
FOUR 4 PROCESSES OF MANAGEMENT
Planning, organizing, directing, and controlling.
61
determining the goals of the business and lining up activities to accomplish these goals.
PLANNING
62
creating divisions, appointing managers, hiring and defining the roles or duties of each one (managers and staff)
ORGANIZING
63
overseeing the daily operation of carrying out the planned activities—managers must act, decide, agree, argue, question, approve, solve.
DIRECTING
64
guarding and guiding people to ensure tasks and activities are done according to plans and some standard of performance.
CONTROLLING
65
TYPES OF MANAGERS
- PRODUCTIONS MANAGER
- MARKETING MANAGER
- FINANCE MANAGER
- SALES MANAGER
- PERSONNEL MANAGER
66
plans what and how to produce, machines needed, and number of workers
PRODUCTIONS MANAGER
67
study of the market: place, product, price, and people
MARKETING MANAGER
68
financial resources, how to source it and how to use it
FINANCE MANAGER
69
selling operation, products, sales force, and customers
SALES MANAGER
70
oversees employees and workers
PERSONNEL MANAGER
71
service activity whose function is to prepare reports that will provide relevant information about the business.
Accounting
72
process of recording, classifying and summarizing transactions and events which are financial in natura and interpreting the results thereof.
Accounting
73
Users of financial statements. A person or entity with a “stake” in the business
STAKEHOLDERS
74
USER: - puts in capital
- is the business profitable?
- will it remain stable?
OWNER OR INVESTOR
75
USER: - runs the business
- are the plans good for the business?
- is it operating profitably?
MANAGER
76
USER: - assesses the paying ability
- will debt be paid on time?
- does it have liquid asset
LENDER or CREDITOR
77
USER: - offers goods or merchandise
- will they be able to pay credit on time?
- does it have liquid assets?
SUPPLIER
78
USER: - does it pay the right taxes?
- does it pass required documents?
GOVERNMENT
79
USER: can it give higher wages, benefits, good working conditions, and security of tenure?
EMPLOYEE
80
USER: can it supply goods at right place and right quality?
CUSTOMER
81
FOUR 4 TYPES OF ACCOUNTING REPORTS
- Management Accounting
- Financial Accounting
- Tax Accounting
- Special Reports
82
managerial reports for management use
Management Accounting
83
- financial reports are the main source of information of stakeholders, or called the general-purpose financial statements.
- audited by CPAs
FINANCIAL ACCOUNTING
84
- pay taxes to the BIR
- determination of taxes and tax returns
TAX ACCOUNTING
85
some businesses are required to prepare special reports to regulatory bodies like the BSP, and SEC.
SPECIAL REPORTS
86
involves two systems: measurement system, and communication system.
ACCOUNTING INFORMATION SYSTEM
87
ACCOUNTING INFORMATION SYSTEM can be classified into
1. Measurement System
2. Communication System
88
Processing phase. Involves analyzing, measuring, recording, classifying and summarizing
MEASUREMENT SYSTEM
89
Reporting and communicating phase. Involves presentation of formal reports which are communicated to decision makes
COMMUNICATION SYSTEM
90
an AIS must be
EFFICIENT and EFFECTIVE
91
information must be processed at the least cost and effort
EFFICIENT
92
Relevant, information must be able to answer the needs of the decision makers.
EFFECTIVE
93
FIVE 5 PRINCIPLES OF AIS
- Cost-Benefit Principle
- Relevance Principle
- Compatibility Principle
- Flexibility Principle
- Control Principle
94
advantages from the
system > cost of installing the system
COST-BENEFIT PRINCIPLE
95
info must be reported promptly and is useful
RELEVANCE PRINCIPLE
96
System must be compatible with the unique system of the company
- sole proprietorship = simple AIS
- multi-national company = complex AIS
COMPATABILITY PRINCIPLE
97
System should allow for changes to come up with timely and updated information in response to changes and pressure
FLEXIBILITY PRINCIPLE
98
AIS of the firm must have good internal control
CONTROL PRINCIPLE
99
Enumerates the methods and procedures necessary to monitor the activities of the business and ensure efficient operation.
INTERNAL CONTROL
100
INTERNAL CONTROL ACHIEVED WHEN:
1. Properties of the business are protected
2. Records are accurate and reliable
3. Company policies are complied with
4. Performance of business units are properly evaluated
101
- sum total of the accounting process
- involves: people, documents, records, methods, and equipment
ACCOUNTING INFORMATION SYSTEM
102
involved in all four phases
PEOPLE
103
support data gathered in first phase
DOCUMENTS
104
all phases involve certain methods or procedure of doing
METHODS
105
to process data and generate information, needed in all phases
EQUIPMENTS
106
starts with gathering of documents
DATA PROCESSING
107
activity or event taking place in business expressed in terms of money
TRANSACTIONS
108
- describes in words and amounts the nature of the transaction
-comes from various places: Collection Officer, Cashier from Finance dept., Sales Officer from Sales dept., and Disbursing Officer from Finance dept.
BUSINESS DOCUMENTS
109
requires that documents be properly controlled, numbered, and stored
- only qualified people should be hired
INTERNAL CONTROL
110
Documents are received by
ACCOUNTING OFFICER or CLERK
111
- instrument used to record data captured in documents
-pen in manual, keyboard in computer-based
INPUT DEVICE
112
- data input, be it manual or computerized
JOURNAL ENTRY
113
book of accounts maintained by accounting dept.
RECORDS
114
book where accounting data are gathered and recorded
JOURNAL
115
- book where data from the journal is organized and classified into related groups
- presented to decision makers
LEDGER
116
procedures of processing captured data from the documents
METHODS
117
In accounting, information is processed in a meaningful manner:
1. Journalizing
2. Classifying
3. Summarizing
4. Reporting
5. Interpreting
118
Organized data becomes meaningful information when
SUMMARIZED and REPORTED in the FINANCIAL STATEMENTS prepared by the accountant
119
interprets the data into profitability, solvency, and liquidity.
FINANCIAL STATEMENT ANALYSIS
120
transactions may be recorded, classified, and stored in a computer.
ELECTRONIC DATA PROCESSING (EDP) ENVIRONMENT
121
- device used to draw out information from the system
- printer
OUTPUT DEVICES
122
COMPUTERS can process data, but cannot
THINK, EVALUATE, or RENDER JUDGEMENT.
123
ACCOUNTING SOFTWARE APPLICATIONS
Peach Tree, MYOB, and Quick Books
124
FINANCIAL REPORTS
INCOME STATEMENT
STATEMENT OF OWNER’S EQUITY
STATEMENT OF CASH FLOWS
STATEMENT OF FINANCIAL POSITION
125
shows how wealth is produced
INCOME STATEMENT
126
shows reason behind change in wealth
STATEMENT OF OWNER’S EQUITY
127
shows what happened to cash
STATEMENT OF CASH FLOWS
128
shows the wealth of the business, A=LC
STATEMENT OF FINANCIAL POSITION
129
term used for any business venture or undertaking
- called a COMPANY if it is a partnership or a corporation
BUSINESS ENTERPRISE
130
Financial reports are usually ______, but _______ are also allowed.
-annually
-interim reports (monthly or quarterly)
131
COMMON NEEDS of stakeholders are addressed by reports called
GENERAL PURPOSE FINANCIAL STATEMENTS.
132
- also known as profit or loss statements, or statement of earnings
- reports the financial performance of the business
- revenues and expenses are recorded
INCOME STATEMENTS
133
- activities that caused the owner’s equity to change
STATEMENT OF CHANGES IN OWNER’S EQUITY
134
4 activities affecting Owner's Equity
- investment
- withdrawal
- profit
- loss
135
- cash inflows: investment, loan, and sales
- cash outflows: purchases of machine, and payment of expenses
- financing, investing, and operating activities
STATEMENT OF CASH FLOWS
136
- formerly called balance sheet
- shows how healthy or robust the enterprise is
- assets, liabilities, and owner’s equity
STATEMENT OF FINANCIAL POSITION
137
financial structure when ASSETS > LIABILITIES
SOLVENT
138
when CASH > LIABILITIES
LIQUID
