Conceptual Framework and Accounting Standards Review

Vocabulary practice flashcards covering the accountancy profession, conceptual framework, and major accounting standards (PAS/PFRS) as outlined in the San Beda University lecture notes.

Accounting

A service activity whose function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.

Identifying

The analytical component of accounting involving the recognition or nonrecognition of business activities as accountable events.

Internal Transactions

Economic events involving the entity and within the entity only, such as production or casualty losses from an act of God.

Historical Cost

The original acquisition cost of an asset and the most common financial attribute used in measuring financial information.

Communicating

The formal component of accounting involving the process of preparing and distributing accounting reports to potential users.

RA 9298

The Philippine Accountancy Act of 2004, which is the law regulating the practice of accountancy in the Philippines.

Auditing

The examination of financial statements by independent CPAs for the purpose of expressing an opinion as to the fairness with which the financial statements are prepared.

Continuing Professional Development (CPD)

The acquisition of advanced knowledge and skills after initial registration as a CPA, mandated by RA 10912.

Generally Accepted Accounting Principles (GAAP)

Accounting rules, procedures, and practices developed on the basis of experience, reason, and practical necessity that derive authority from general acceptance.

Financial Reporting Standards Council (FRSC)

The accounting standard-setting body created by the PRC to assist the Board of Accountancy in carrying out its powers under RA 9298.

Philippine Interpretations Committee (PIC)

A body formed by the FRSC to prepare interpretations intended to give authoritative guidance on issues likely to receive unacceptable treatment.

Primary Users

The parties to whom general purpose financial reports are primarily directed, including existing and potential investors, lenders, and other creditors.

Relevance

A fundamental qualitative characteristic describing the capacity of information to influence a decision by making a difference in the decisions made by users.

Materiality

A quantitative threshold where information is included if its omission, misstatement, or obscuring could reasonably affect the economic decisions of primary users.

Faithful Representation

A fundamental qualitative characteristic meaning that the actual effects of transactions are properly accounted for and reported; includes completeness, neutrality, and freedom from error.

Prudence

The exercise of care and caution when dealing with uncertainties in measurement so that assets or income are not overstated and liabilities or expenses are not understated.

Substance Over Form

The concept that the economic substance of transactions or events should be emphasized when they differ from their legal form.

Comparability

An enhancing qualitative characteristic that allows users to identify similarities in and differences between items within an entity or across different entities.

Verifiability

An enhancing qualitative characteristic implying consensus among knowledgeable and independent observers that a representation is faithfully represented.

Reporting Entity

An entity that is required or chooses to prepare financial statements; it is not necessarily a legal entity.

Going Concern

The underlying assumption that an entity will continue in operation for the foreseeable future.

Asset

A present economic resource controlled by the entity as a result of past events.

Liability

A present obligation of the entity to transfer an economic resource as a result of past events.

Revenue

Income that arises in the course of ordinary regular activities, such as sales, fees, interest, dividends, royalties, and rent.

Matching Principle

The application of expense recognition requiring that costs and expenses incurred in earning revenue be reported in the same period as the revenue.

Fair Value

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.

Financial Capital

A concept of capital maintenance where net income occurs when the nominal amount of net assets at the end of the year exceeds the amount at the beginning.

Statement of Financial Position

A formal statement showing the assets, liabilities, and equity of an entity used to evaluate liquidity, solvency, and financing needs.

Operating Cycle

The time between the acquisition of assets for processing and their realization in cash or cash equivalents.

Cash Equivalents

Short-term highly liquid investments that are readily convertible to known amounts of cash and have a maturity of $3$ months or less from the date of acquisition.

Accounting Policies

Specific principles, bases, conventions, rules, and practices applied by an entity in preparing and presenting financial statements.

Adjusting Events

Events after the reporting period that provide evidence of conditions that existed at the end of the reporting period.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee; usually evidenced by owning $20\%$ or more of the voting power.

Intangible Asset

An identifiable non-monetary asset without physical substance, controlled by the entity as a result of past events.

Biological Assets

Living plants and animals, measured at fair value less costs to sell under PAS 41.

Onerous Contract

A contract in which the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received.

Operating Segments

Components of an entity that engage in business, whose results are reviewed by the chief operating decision maker, and for which 10% quantitative thresholds often apply for reporting.