Q1 Flashcards
What is the basic purpose of accounting?
The basic purpose of accounting is to provide information that is beneficial for making economic decisions
Separately identifiable combination of persons and property that uses economic resources
Economic entity
What are economic activities?
Activities that affect the assets, liabilities and equity of the economic entity
Designed to meet the common needs of most statement users
General purpose
Designed to meet the specific needs of particular statement user
Special purpose
Why is accounting the language of the business?
It is fundamental to communication of financial information
General purpose of accounting process
To provide information that can help the users in terms of making economic decision
Communication of financial statements and other financial information
Financial reporting
Who are the internal users of financial statements?
Active owners and the management
What does management accounting do?
Management accounting is a specialization wherein they cater the special needs of the management in terms financial information to aid in making economic decisions
Who are the external users?
Inactive owners, creditors, lenders, suppliers, potential and existing investors, taxing authorities, regulatory bodies, employees, and more
Why do the indirect users use financial statements? Who are the indirect users?
To protect their own interest. Owners, investors, suppliers, creditors, employees, etc
What is the purpose of Indirect users in using financial statements?
To protect the direct users, these are the regulatory bodies, etc
Focus of financial accounting
Recognition, measurement , and communication of economic resource, economic obligations, and changes in economic resource and economic obligations
How do financial accounting communicate its information to the users?
By using financial statements
What are the common information needs in a general purpose financial statement?
To evaluate the business’ profitability , liquidity, and stability.
What is the main purpose of accounting standards in external users?
To ensure relevance and reliability of information given to users
What is the main purpose of financial statements in internal users?
To evaluate an entity’s performance and financial condition
Who served the information needs of the internal users?
Management accounting
This is concerned with the measurement and recognition of cost of service provided or products manufactured
Cost accounting
Concerned with the computation of of taxes and preparation of tax returns submitted to a taxing authority
Tax accounting
What phase is the bookkeeping
Recording
Independent examination of the financial statements conducted by a CPA for the purpose of rendering an opinion as to the fairness of presentation of the FS.
Auditing
What is the purpose of IFRS?
To develop a single set of high quality, understandable, enforceable, and globally accepted accounting standards
