FABM Flashcards
(145 cards)
1
Q
the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part of at least, of financial character and interpreting the results thereof.”
A
Accounting
2
Q
Involves selecting economic events that are relevant to a particular business transaction.
× Example:
Sales of bread
* Purchase of materials
A
identifying
3
Q
Involves keeping a chronological diary of events that are measured in pesos.
* The diary referred to in the definition are the:
* Journals
* Ledgers
A
Recording
4
Q
- Occurs through the preparation and distribution of financial and other accounting reports
A
Communicating
5
Q
Accounting is a ___________
A
x is a service activity
x is a process
× deals with financial information and transactions
× is an information system
× is both an art and a discipline
6
Q
- Around 3600 BC, record-keeping was already common from
Mesopotamia, China and India to Central and South America. - The oldest evidence of this practice was the “clay tablet” of
Mesopotamia which dealt with commercial transactions at the time such as listing of accounts receivable and accounts payable
A
Cradle of Civilization (1)
7
Q
The most important event in accounting history is generally considered to be the dissemination of double-entry bookkeeping system by Luca Pacioli in 14th century
Italy.
A
14TH CENTURY - DOUBLE-ENTRY
BOOKKEEPING (2)
8
Q
was an Italian mathematician, Franciscan friar, collaborator with Leonardo da Vinci, and an early contributor to the field known as accounting.
A
FRA LUCA BARTOLOMEO
DE PACIOLI
9
Q
“The Father of Accounting and Bookkeeping”* in Europe and he was the second person to publish a work on the double-entry system of bookkeeping on the continent.
A
FRA LUCA BARTOLOMEO
DE PACIOLI
10
Q
He wrote Summa de Arithmetica, Geometria, Proportioni et
Proportionalita (Everything about
Arithmetic, Geometry, Proportion and Proportionality)
A
FRA LUCA BARTOLOMEO
DE PACIOLI
11
Q
The thorough study of accounting and development of accounting theory began during this period. Social upheavals affecting government, finances, laws, customs and business had greatly influenced the development of accounting
A
FRENCH REVOLUTION (1700s) (3)
12
Q
Mass production and the great importance of fixed assets were given attention during this period
A
THE INDUSTRIAL REVOLUTION (1760 - 1830 ) (4)
13
Q
The modern, formal accounting profession emerged in Scotland in 1854 when Queen Victoria granted a Royal Charter to the Institute of Accountants in Glasgow, creating the profession of the Chartered Accountant (CA).
In the late 1800s, chartered accountants from Scotland and Britain came to the U.S. to audit British investments. Some of these accountants stayed in the U.S., setting up accounting practices and becoming the origins of several U.S.
accounting firms.
A
19TH CENTURY - THE BEGINNINGS OF MODERN ACCOUNTING IN EUROPE AND AMERICA (5)
14
Q
x The accounting profession in the 20th century developed around state requirements for financial statement audits. Beyond the industry’s self-regulation, the government also sets accounting standards, through laws and agencies such as the Securities and Exchange Commission (SEC).
A
THE PRESENT - THE DEVELOPMENT OF MODERN ACCOUNTING STANDARDS AND COMMERCE (6)
15
Q
an association of Certified Public Accountants engaged in the various fields of accounting. _______ classifies these fields or branches of accounting into four main sectors, namely: Public Accounting (public practice), Private Accounting (commerce and industry), Government Accounting and Accounting Education.
A
(PICPA) Philippine Institute of Certified Public Accountants`
16
Q
the accountant performs or offers to perform any activity that will result to the issuance of an attest report that is in accordance with professional standards. Such activities include consulting services, personal financial planning services, the preparation of tax returns, and advice on tax matters for a fee.
A
Public accounting
17
Q
What is CPA
A
Certified Public Accountants
18
Q
Examples of public accounting services:
A
- External Auditing
- Tax Preparation and Planning Service
- Management Advisory Services
19
Q
public accountants examine the financial statements in order to express an opinion on whether statements have been fairly presented or not .The auditor critically examines the accounting records of the client to check if business transactions have been properly recorded. The auditor then issues an independent audit report of his or her findings.
A
External Auditing
20
Q
Some CPAs also offer tax services wherein they advise and help their clients in tax planning and preparing tax returns. In this branch of public accounting, the accountant is a tax specialist. He or she is expected to be knowledgeable about revenue regulations and tax laws. He or she also represents the client in any tax-related case filed by the Bureau of Internal Revenue (BIR).
A
TAX PREPARATION AND PLANNING SERVICE
21
Q
an area in public accounting that involves financial planning and control, and the development of accounting and computer systems. The accountant advises management on matters such as the installation of an accounting system, finance, budgeting, business processes, introduction of new products, and other business activities.
A
MANAGEMENT ADVISORY SERVICES
22
Q
involves setting up systems of recording business transactions that are aggregated into financial statements.
It includes the development and interpretation of accounting information intended to assist management in operating business.
A
PRIVATE ACCOUNTING
23
Q
This branch of private accounting provides economic and financial information for investors, creditors, and other external users. It uses a system of reporting designed to meet the information needs of external users. Financial accounting is governed by an established body of standards and principles. It focuses on the recording and classifying of business transactions while applying Generally Accepted Accounting Principles (GAAP).
A
FINANCIAL ACCOUNTING
24
Q
accounting under private accounting are as follows:
A
- Financial Accounting
2.Cost Accounting
3.Budgeting
4.Accounting Information System
5.Tax Accounting
6.Internal Auditing
25
focuses on accumulating manufacturing costs for financial reporting and decision-making purposes. It covers the reporting of financial information relevant to manufacturing operations. It provides management with the necessary tools and information for planning and controlling activities.
COST ACCOUNTING
26
provides a detailed collection and reporting of the expenditures and revenues involved in a business or company operations. This branch of private accounting tracks the financial details of the firm, including the money taken in and the money spent by the company and the staff. It also assists the management in quantifying goals concerning revenue, cost of sales or services, and operating expenses
BUDGETING
27
collects and processes transaction data. It also disseminates information to interested parties. It involves the designing of both manual and computerized data processing systems.
ACCOUNTING INFORMATION SYSTEM
28
It deals with the preparation of various tax returns and doing tax planning for the business. This is similar to the tax services done in public accounting.
TAX ACCOUNTING
29
This branch of private accounting reviews the business operations to check if they are complying to management policies. It also evaluates the efficiency of business operations. Normally, an internal auditor is a hired employee of a company.
INTERNAL AUDITING
30
is a system used in government offices to record and report financial transactions. It is the systematic process of collecting, recording, classifying, summarizing and interpreting the financial transactions relating to the revenues and expenditures of government offices. Government accounting reveals how public funds have been generated and utilized. It is employed in both national and local governments.
GOVERNMENT ACCOUNTING
31
what is (COA)
Commission on Audit
32
This branch of accounting is responsible for training future accountants. It engages in teaching accounting, financial management, taxation and other related business course. As per Commission on Higher Education (CHED) Memorandum Order (CMO) No. 3, Series 2007, a CPA in accounting education should possess the educational qualifications, professional experience, classroom teaching ability, computer literacy, scholarly research productivity, and other attributes that are essential for the successful conduct of a professional accounting program.
ACCOUNTING EDUCATION
33
CPAs in Specialized Areas
1. Forensic Accounting
2. Information Technology Services
3. Environmental Accounting
4. International Accounting
34
provide the detective work needed to investigate and examine evidence of white-collar financial crimes such as stealing and fraud. They often act as expert witnesses in legal proceedings are prepare evidence to be presented in court.
Forensic Accounting
35
Businesses often seek individuals who can design and implement customized software systems. CPAs who possess strong skills in information technology can work with e-commerce ventures and consult with others to determine which decisions are the most financially and technologically sound for a company.
Information Technology Services
36
CPAs involved in ______________ determine how companies can be both profitable and environmentally-responsible. They do environmental compliance and set up preventative systems to ensure compliance and avoid future environmental-related claims or disputes.
Environmental Accounting
37
are knowledgeable in international trade rules and regulations, international mergers, government regulations, tax laws, and overseas transactions. CPAs who work in this area often travel abroad and can speak and understand different languages.
International Accounting
38
It is important to keep in mind that the primary objective of accounting is to provide information that is useful to parties (persons and groups) inside and outside the business or corporation.
These parties are called ______.
users
39
Users of financial information in a company can be categorized into two: ________________
external users and internal users.
40
are people outside the company. This means that they do not work in the company and are not directly involved in its operations. They are only interested in the information generated by financial records in the accounting procedures of the company.
External users
41
The external users of financial reports are those who make their decisions based on the company's financial information. They are the following:
1. Potential and existing investors
2. Creditors and potential creditors
3. Customers and consumers
4. Suppliers
5. Tax authorities
6. Regulatory bodies
7. Public
42
They need information to help them decide whether they should invest or not in the business. Through past performances or operating results of the company, they would want to know potential returns on their investment.
POTENTIAL AND EXISTING INVESTORS
43
Their goal is to make more money or earn a profit out of the investments they have provided. As such, investors are also called ___________. ___________ of a company provide shares. The shares they provide are used by the company to buy resources and pay fees to continue its business operations.
Shareholder
44
They assess the creditworthiness and the capability of the business to pay its obligation including the related interest on maturity date. One example of a creditor is a bank. A bank can be a possible financier of a business. Take note that creditors decide and determine whether they should loan money or deliver supplies to a company.
CREDITORS AND POTENTIAL CREDITORS
45
They may obtain financial information to acquire a picture of the longevity and continuity of a business, especially when there is a potential long-term engagement and interaction between them and the business enterprise.
CUSTOMERS and CONSUMERS
46
They use the financial statements of their customers to determine whether the debts owed to them will be paid when due or whether the customer has enough funds or resources to pay the goods to be delivered or the services to be rendered.
SUPPLIERS
47
Government and ___________ must determine how much a business earns in order to assess its tax liabilities. Thus, they use financial information to calculate how much tax a company should be paying and if it is paying the correct amount of tax.
TAX AUTHORITIES
48
They want to ensure that the company's disclosure of accounting information is in accordance with the rules and regulations set in order to protect the interest of the stakeholders who rely on such information.
REGULATORY BODIES
49
They use the financial information to know how the business affects the economy possible prospects for employment, and/or for educational and research purposes.
PUBLIC
50
This presents the entity's assets, liabilities, and capital as of a given date. The data in this statement provide information about the entity's financial condition.
Statement of Financial Position
51
- This shows the financial performance of a business for a certain period. It tells how much a business has earned or lost. This statement shows the results of operations of the enterprise for a given period of time.
Statement of Comprehensive Income
52
This tells how much of the company's net income, which is shown on the Statement of Financial Position, is reinvested in the business. Drawing/withdrawal is also a deduction to equity account.
Statement of Changes in Equity
53
This statement shows the sources or inflows and uses or outflows of cash for a specific period of time.
Statement of Cash Flows
54
are those who make decisions on behalf of the organization.
INTERNAL USERS
55
Internal users include:
.
1. Owners
2. Managers / Management
3. Employees / Labor Unions
56
A business can be considered as one of the primary sources of income of the business _________. An ________ depends on financial information to determine the profitability and longevity of his or her business. Ultimately, he or she is the one who decides whether to pursue and maintain the business or not.
OWNERS
57
use financial information in carefully planning the improvement of the business. This allows them to identify the areas that require more attention and the procedures that need to be checked. They also use the information to assess the performance of the business under their guidance.
MANAGERS / MANAGEMENT
58
They plan, organize and run a business.
MANAGERS
59
- Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operating Officer (COO), among others.
Top-level management
60
- Department heads, branch managers, and junior executives, among others.
- They ensure that their units performances are aligned with the organizations objectives.
Middle-level management
61
- Supervisors and team leaders.
- They oversee the day-to-day operations and direct employees in the performance of tasks.
Lower-level management
62
They assess the company's profitability and stability, and their consequence on future salary and job security.
EMPLOYEES / LABOR UNIONS
63
These validated financial statements verify the accuracy of data presented. These ensure owners and managers that the accounting procedures were conducted * efficiently and the resulting data are correct and factual.
Audited Financial Statements
64
The information from _______ allows managers and owners to determine if their taxes have been properly paid by the company and examined by the BIR. This assures them that they do not have pending tax obligations.
Income Tax Returns
65
Managers and owners may have cost-control reports that can serve as sources of data which include every cost incurred during all business operations (e.g., purchase of materials, labor cost, production cost). These data can be used as bases in calculating the profit or loss of the company for a period of time.
Purchases and costs reports
66
TYPES OF BUSINESSES ACCORDING TO OWNERSHIP
1. SOLE/SINGLE PROPRIETORSHIP
2. PARTNERSHIP
3. CORPORATION
4. COOPERATIVES
67
- Is a business that is owned by only one individual for the practice of trade and profession.
- It is the simplest and least costly form of ownership among other forms of business.
- It is not separate from the owner. The business and the owner are inseparable.
SOLE PROPRIETORSHIP
68
Is a business that is owned by two or more individuals pooling their resources together as a common fund. The partners are normally involved in the management and operation of the business.
The profit of the business is divided among partners as per partners agreement. The written agreement between or among partner is called articles of co-partnership.
PARTNERSHIP
69
- has unlimited liability
General Partnership
70
- with limited partners
- at least one general partner
- enjoy limited liability to the extent only of their capital contributions.
Limited Partnership
71
two main types of partnerships.
General and Limited Partnership
72
- Is a business organized as a separate legal entity (artificial person) under the corporation law with ownership divided into transferable shares of stocks.
- A _____________ is a business required to have five to fifteen incorporators.
CORPORATION
73
What is (PFRS)
Philippine Financial Reporting Standards
74
What is (PAS)
Philippine Accounting Standards
75
defines corporation as "an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence".
Section 2 of the Corporation Code of the Philippines
76
The owners are also called _________________.
stockholders or shareholders.
77
____________ refer to those who originally formed the corporation.
Incorporators
78
A _____________ issues to its owners or shareholders shares of stocks which are evidenced by stock certificates.
profit corporation
79
A ______________, on the other hand, does not issue shares of stocks. Its owners are called members.
non-profit corporation
80
is a duly registered association of persons with a common bond of interest, voluntarily joining together to achieve their social, economic and cultural needs.
COOPERATIVE
81
The owners are called __________ who contribute equitably to the capital of the cooperative.
members
82
A cooperative usually requires at least ___ members to function.
15
83
What is (CDA)?
Cooperative Development Authority
84
Can cooperative be either incorporated or unincorporated?
Yes
85
3 Types of Business according to activity
1. SERVICE BUSINESS
2. MERCHANDISING BUSINESS
3. MANUFACTURING BUSINESS
86
These businesses focus on providing intangible products, such as offering professional skills, proposals, and expertise.
SERVICE BUSINESS
87
Some examples of service businesses
- Accounting firms
- Medical clinic
-Law firms
- Banks
-Schools
- Repair shops
- Hair salons and spa
- Call center
88
This type of business is commonly known as the "buy and sell" business.
Products are bought from manufacturers or other merchandisers and are sold at an amount higher than the purchase price.
MERCHANDISING BUSINESS
89
Some examples of merchandising business
-Grocery stores
- Drug stores
-Hardware
- Sari-sari stores
-Department stores
- Book stores
90
This is the type of business wherein materials are bought to create a new product.
MANUFACTURING BUSINESS
91
Some examples of manufacturing businesses
- Food factories
- Garment factories
- Car manufacturing companies
- Shoe manufacturing businesses
92
is called the language of business. It communicates the financial condition and performance of a business to interested users for decision-making purposes.
Accounting
93
A widely accepted set of rules, concepts, and principles referred to as the _________ ________ __________ __________ governs the application of accounting procedures.
Generally Accepted Accounting Principles (GAAP)
94
has been developed by the accounting professionals to guide preparers of financial statements in recording and reporting financial information regarding a business enterprise, hence aiding in the effective execution of the accounting procedure and in communicating the financial condition of the business.
GAAP
95
The accounting standards used in the Philippines
Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS).
96
What is PAS?
Philippine Accounting Standards
97
What is PFRS?
Philippine Financial Reporting Standards
98
PAS and PFRS are adopted by _______
Financial Reporting Standards Committee (FRSC).
99
What is FRSC?
Financial Reporting Standards Committee
100
are considered GAAP and apply to most financial statements. In addition to these concepts, there are other, more technical standards accountants must follow when preparing financial statements.
The basic assumptions and principles
101
5 basic assumptions underlie the financial accounting structure:
1. Economic Entity Assumption
2. Accrual Basis Assumption
3. Going Concern Assumption
4. Monetary Unit Assumption
5. Time-Period Assumption
102
It assumes that all of the business transactions are separate from the business owner's personal transactions.
ECONOMIC ENTITY ASSUMPTION
103
It requires that all business transactions and other events are recognized in the accounting records when they occur, rather than when the cash or equivalent is received or paid.
ACCRUAL BASIS ASSUMPTION
104
It requires that all business transactions and other events are recognized in the accounting records when they occur, rather than when the cash or equivalent is received or paid.
ACCRUAL BASIS ASSUMPTION
105
In the absence of contrary information, a business entity is assumed to remain in existence for an indeterminate period of time. The current relevance of the historical cost principle is dependent on the going concern assumption.
GOING CONCERN ASSUMPTION
106
It assumes that only transactions that can be expressed in terms of money are recorded. Hence, any non financial or non-monetary information that cannot be measured in terms of money are not recorded in the accounting books. A memorandum entry will be prepared instead.
MONETARY UNIT ASSUMPTION
107
It means that financial statements are prepared at equal time intervals.
TIME PERIOD ASSUMPTION
108
is a twelve-month period that ends on December 31. It is the accounting period a company follows for tax purposes.
Calendar year
109
are detailed accounting rules and guidelines that entities must follow when measuring, recording, and reporting financial data. Applying these principles enhances reliability, relevance and consistency of financial information which results to better understanding and decision-making of users.
basic accounting principles
110
Cost refers to the amount spent (cash or the cash equivalent) when an item was originally obtained, whether that happened last year or ten years ago; amounts are not adjusted upward for inflation.
COST PRINCIPLE
111
In the preparation of financial statements, the accountant should include sufficient information to permit the stakeholders to make an informed judgement about the financial condition of the enterprise.
FULL DISCLOSURE PRINCIPLE
112
This principle requires that expenses be matched with revenues.
MATCHING PRINCIPLE
113
________________________as soon as goods have been sold (delivered to the customers) or a service has been rendered, regardless of when the money is actually received.
REVENUE RECOGNITION PRINCIPLE
114
Business transactions that may affect the decision of a user of financial information are considered important or material, and thus, must be reported properly.
MATERIALITY PRINCIPLE
115
This principle states that given two options in the valuation of business transactions, the amount recorded should be the lower rather than the higher value.
CONSERVATISM OR PRUDENCE PRINCIPLE
116
This principle requires business transactions to have some form of impartial (unbiased) supporting evidence or documentation. Also, it entails that bookkeeping and financial recording be performed with independence, that is free of bias and prejudice.
OBJECTIVITY PRINCIPLE
117
is an individual accounting record of the movements(increases and decreases) in specific accounts.
Account
118
Five Major Accounts
Assets
Liabilities
Equity
Revenue
Expenses
119
Main Classification of Accounts
assets, liabilities, and owner’s equity.
120
Owner’s equity includes
revenues and expenses.
121
are resources controlled by the business as a result of past transactions and events and from which future economic benefits are expected to flow to the business. These are anything of value that is owned by the business.
Assets
122
Assets can be further classified into two:
1. Current Assets
2. Non-current Assets
123
are those reasonably expected to be realized in cash within one year from the reporting date or the normal operating cycle, whichever is longer.
Current Assets
124
If an asset cannot be classified as current, then its rightful classification is a ________________
non-current asset.
125
is the average time it takes the business to turn the cash used in the business to cash received from selling goods or rendering services.
Operating cycle
126
Examples of Current Assets
1. Cash
2. Accounts Receivable
3. Notes Receivable
4. Inventories
5. Unused Supplies
6. Prepaid Rent
127
Examples of Non-current Assets
1. Building
2. Land
3. Equipment
4. Furniture and fixtures
128
Examples of Assets(Contra-Assets)
1. Allowance for Doubtful Accounts
2. Accumulated Depreciation
129
are those reasonably expected to be settled by payment of cash, delivery of goods or performance of service within its normal operating cycle or within one year from the reporting date, whichever is longer.
Current Liabilities
130
are obligations reasonably expected to be paid in cash beyond one year.
non-current liabilities
131
Examples of Current Liabilities
1. Accounts Payable
2. Notes Payable
3. Unearned Revenue
132
Examples of Non-Current Liabilities
1. Loan Payable
2. Mortgage Payable
133
contains the net difference between total assets and total liabilities.
owner's equity or capital
134
If it is a sole proprietorship form of business organization, owner's capital account is used and this is classified under ____________
owner's equity or equity.
135
are the earnings arising from the main line of operations of the business.
Revenues
136
Examples of Revenue Accounts
1. Service Revenue
2. Sales
3. Interest Incomes
4. Professional Fees
137
are the costs being incurred by the business in generating revenues.
Expenses
138
Examples of Expenses Accounts
1. Utilities Expenses
2. Taxes and Licenses Expense
3. Salaries Expense
4. Wages Expense
5. Cost of Sales
6. Doubtful Accounts Expense
7. Depreciation Expense
139
The basic accounting equation
Assets = Liabilities + Capital
140
Should the basic accounting equation should be in balance at all times?
Yes
141
must equal the sum of liabilities and owner's equity.
Assets
142
The _______ in the equation ensures balance of the movement in the three main accounts being used in accounting. It also separates the left side from the right side of the equation.
Equal sign
143
What is on the left side of the basic accounting equation?
Debit or Credit
Debit
144
What is on the right side of the basic accounting equation?
Debit or Credit
Credit
145
serves as the backbone of the entire accounting cycle. All the steps that go with the accounting cycle should abide by this equation.
Basic Equation
