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Chapter 2 Flashcards

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1
Q

We follow certain standards.

A

ACCOUNTING CONCEPTS AND PRINCIPLES

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2
Q

serves as a guide

A

ACCOUNTING CONCEPTS AND PRINCIPLES

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3
Q

Set of logical ideas and procedures that guide the accountant in recording and communicating
economic information.

A

ACCOUNTING CONCEPTS AND PRINCIPLES

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4
Q

They provide a general framework by which accounting practice can be evaluated and they serve as guide in development of new practices and procedures.

A

ACCOUNTING CONCEPTS AND PRINCIPLES

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5
Q

BASIC ACCOUNTING CONCEPTS

A
  1. Separate Entity Concept
  2. Historical Concept Principle
  3. Going Concern
  4. Matching Concept
  5. Accrual basis of Accounting
  6. Time Period
  7. Stable Monetary Unit
  8. Materiality and Aggregation
  9. Cost- Benefit (Cost Constraint)
  10. Full Disclosure Principle
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6
Q

Separate Entity Concept is also called as ___________

A

Business entity principle

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7
Q

the business is viewed as a separate person, distinct from its
owners. Only the transactions of the business are recorded in the books of accounts. The
personal transactions of the business owner(s) are not recorded

A

Separate Entity Concept

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8
Q

assets are initially recorded at their
acquisition cost.

A

Historical Concept Principle

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9
Q

Going concern is also known as __________

A

Continuity assumption

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10
Q

continuous flow of the business

A

Going Concern

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11
Q

it means that the accounting entity is viewed as continuing in operation indefinitely in the absence of evidence to the contrary.

A

Going Concern

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12
Q

financial statements are prepared normally on the assumption that the entity shall continue in operation for the foreseeable future.

A

Continuity assumption

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13
Q

The opposite of going concern is ____________

A

Liquidating Concern

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14
Q

If the business intends to end its
operations or if it has no other choice but to do so

A

Liquidating Concern

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15
Q

For every expense, has __________________

A

Matching Concept
* cost revenue

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16
Q

some costs are initially recorded as assets and
charged as expenses only when the related revenue is recognized.

A

Matching Concept

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17
Q

PAS 1 requires that an entity prepares its financial statements,
except for cash flow information, using the accrual basis of accounting.

A

Accrual basis of Accounting

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18
Q

economic events are recorded in the period in which
they occur rather than at the point in time when they affect cash.

A

Accrual basis of Accounting

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19
Q

__________ is recognized in the period when it is ________ rather than when it is ________,

A
  • income
  • earned
  • collected
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20
Q

_______ is recognized in the period when it is __________ rather than when it is _______.

A
  • expense
  • incurred
  • paid
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21
Q

Time period is also known as ___________

A

Periodicity Principle

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22
Q

It requires that the indefinite life of an entity is subdivided into time periods or accounting periods which are usually of equal length for the purpose of preparing financial reports on financial position, financial performance and cash flows.

A

Time Period

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23
Q

is a twelve month period that starts on January 1 and ends on December 31.

A

calendar year

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24
Q

is a twelve month period that starts on a date other than
January 1 and ends on any month.

A

natural year or fiscal year

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25
An accounting period that is shorter than 12 months
Interim Period
26
can be a month or quarter (3 months) or a semiannual period (6 months).
Interim Period
27
the monetary unit assumption has two aspects, namely _________ & ________
Stable Monetary Unit * Quantifiability * stability of the peso,
28
means that the assets, liabilities, equity, income and expenses should be stated in terms of a unit of measure which is the peso in the Philippines
Quantifiability aspect
29
means that the purchasing power of the peso is stable or constant and that its instability is insignificant and therefore may be ignored.
Stability of the peso assumption
30
guides the accountant when applying accounting principles. This is because accounting principles are applicable only to material items.
Materiality and Aggregation
31
is a matter of professional judgment and is based on the size and nature of an item being judged.
Materiality
32
Materiality of an item depends on __________ rather than _________, what is material for one entity may be immaterial for another.
* relative size * absolute size
33
is dependent on good judgment, professional expertise and common sense.
materiality
34
the costs of processing and communication information should not exceed the benefits to be derived from the information’s use.
Cost- Benefit (Cost Constraint)
35
cost should not exceed ________
benefit
36
every cost has benefit
Cost- Benefit (Cost Constraint)
37
the concept is related to both the concepts of materiality and cost benefit.
Full Disclosure Principle
38
Sufficient detail to disclose matters that make a difference to users
Full Disclosure Principle
39
Sufficient condensation to make the information understandable, keeping in mind the costs of preparing and using it
Full Disclosure Principle
40
Are the qualities or attributes that make financial accounting information useful to the users
Qualitative Characteristics
41
Qualitative Characteristics are classified into:
a. Fundamental Qualitative Characteristics b. Enhancing Qualitative Characteristics
42
Characteristics that relate to the content or substance of financial information. Information must be both relevant and faithfully represented if it is to be useful.
Fundamental Qualitative Characteristics
43
The fundamental qualitative characteristics are _________ and __________
* Relevance * Faithful Representation
44
"Timeliness"
Relevance
45
It means the capacity of information to make a difference in a decision made by users
Relevance
46
is the capacity of the information to influence a decision
Relevance
47
financial information should be related or pertinent to economic decision
Relevance
48
The ingredients of relevance are _____ and ________
* predictive value * confirmatory value
49
when it can help users increase the likelihood of correctly predicting or forecasting outcome of events
predictive value
50
if it provides feedback about previous evaluations. In other words, financial information has confirmatory value when it enables users to confirm or correct earlier expectations.
confirmatory value
51
The predictive and confirmatory roles of information are _________
interrelated
52
the term faithful representation is used instead of the term _________.
reliability
53
means that the financial reports represent economic phenomena or transactions in words and numbers. The descriptions and figures match what really existed or happened.
Faithful Representation
54
means that the actual effects of the transactions shall be properly accounted for and reported in the financial statements.
Faithful representation
55
Ingredients of Faithful Representation
B.1 Completeness B.2 Neutrality B.3 Free from Error
56
It requires the relevant information should be presented in a way that facilitates understanding and avoids erroneous implication.
Completeness
57
is the result of adequate disclosure standard or the principle of full disclosure
Completeness
58
To be complete, the financial statements shall be accompanied by _______________
Notes to Financial Statements
59
The purpose of the notes is to provide the necessary disclosures required by _____________
Philippine Financial Reporting Standards
60
It means that the financial statements should not be prepared so as to favour one party to the detriment of another party
Neutrality
61
the information contained in the financial statements must be free from bias.
Neutrality
62
Neutrality is synonymous with the all- encompassing _____________. To be neutral is to be____.
"Principle of Fairness” * fair
63
unintentional
Free from Error
64
when you make mistake
adjustment entry
65
intentional
Fraud
66
It means there are no errors or omissions in the description of the phenomenon and the process used to produce the reported information has been selected and applied with no errors in the process.
Free from Error
67
free from error does not mean ________________ in all respects
perfectly accurate
68
Intended to increase the usefulness of the financial information that is relevant and faithfully represented.
Enhancing Qualitative Characteristics
69
relate to the presentation or form of financial statements
Enhancing Qualitative Characteristics
70
Enhancing Qualitative Characteristics
a. Understandability b. Comparability c. Verifiability d. Timeliness
71
Requires that financial information must be comprehensible or intelligible if it is to be useful
Understandability
72
The information should be presented in a form and expressed in terminology that a user understands
Understandability
73
Classifying, characterizing and presenting information _________________ make it understandable
"clearly and concisely”
74
It means the ability to bring together for the purpose of noting points of likeness and difference.
Comparability
75
It enables users to identify and understand similarities and dissimilarities among items
Comparability
76
Comparability may be made _______ an entity or between and ______ entities
* within * across
77
it is the quality of information that allows comparisons within a single entity through time or from one accounting period to the next.
Comparability within an entity
78
Comparability within an entity is also known as
Horizontal Comparability or Intracomparability
79
it is the quality of information that allows comparison between two or more entities engaged in the same industry.
Comparability across entities
80
This comparability is also known as
intercomparability or dimensional comparability
81
Verify
Verifiability
82
It means that different knowledgeable and independent observers could reach consensus that a particular depiction is a faithful representation
Verifiability
83
The information is verifiable in the sense that is supported by evidence so that an accountant that would look into the same evidence would arrive at the same decision or conclusion
Verifiability
84
It means having information available to decision makers in time to influence their decisions
Timeliness
85
requires that financial information must be available or communicated early enough when a decision is to be made.
Timeliness
86
relevant information may lose relevance if there is undue delay in the reporting.
Timeliness

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