Foundations of Accounting and Financial Reporting - Lesson 2

Comprehensive vocabulary flashcards generated from Lesson 2 on Foundations of Accounting and Financial Reporting.

Accounting

The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are in part, at least, of a financial character, and interpreting the results thereof.

Jollibee Foods Corporation × Nutricycle Inc. Initiative

A 2025 waste-to-fertilizer initiative targeting 1,572 metric tons of food waste for conversion into fertilizer.

SM Prime Renewable-Energy Result

A sustainability result where 50%+ of the electricity used across its malls comes from renewable sources through rooftop solar and renewable-energy partnerships.

Ayala Land Sustainability Reporting

The reporting of sustainability information alongside financial performance across five areas: energy and water, waste management, emissions, employee safety, and community programs.

Globe's Green Business 2025 Result

A renewable-energy milestone where 34% of Globe's electricity consumption was supplied by renewable energy using solar installations and renewable-energy agreements.

Management (Internal User)

Internal decision-makers who use financial information to plan operations, prepare budgets, monitor performance, and make strategic decisions.

Employees (Financial Information Users)

Users who analyze financial statements to assess job security, compensation, benefits, and the employer's ability to sustain employment.

Investors & Shareholders

Users who evaluate profitability, risk, and returns when deciding whether to buy, hold, or sell shares.

Lenders & Creditors

Users who assess a business's ability to repay loans and interest before granting or renewing credit.

Suppliers & Trade Creditors

Users who determine whether amounts due can be paid on time and decide appropriate credit terms for the business.

Customers (Financial Information Users)

Users who assess whether a business can continue supplying products or services and honoring warranties.

Government & Tax Authorities

External bodies that use financial reporting to determine taxes, enforce laws, formulate policies, and compile economic statistics.

General Public & Communities

External users who review financial information to understand a business's employment, economic, social, and environmental contributions.

Relevance

A qualitative characteristic indicating financial information can make a difference in users' decisions because it has predictive value, confirmatory value, or both.

Faithful Representation

A qualitative characteristic where financial information depicts an economic phenomenon's substance completely, neutrally, and without errors in the reporting process.

Comparability

A qualitative characteristic enabling users to identify and understand similarities and differences across companies or across reporting periods.

Verifiability

A qualitative characteristic where knowledgeable, independent observers can reach a reasonable agreement that information faithfully represents what it claims to represent.

Timeliness

A qualitative characteristic requiring financial information to reach decision-makers early enough to influence their decisions.

Understandability

A qualitative characteristic achieved when financial information is classified, described, and presented clearly and concisely.

Business Entity Concept

An accounting concept stating that a business is considered distinct and separate from the owner(s) of the business.

Accrual Basis

An accounting principle under GAAP where income is recognized when earned and expenses are recognized when incurred.

Stable Monetary Unit

An accounting concept assuming a uniform means of measurement for reporting financial transactions.

Periodicity

An accounting assumption stating that the operating life of an enterprise may be divided into distinct time periods.

Going Concern

An accounting assumption that an enterprise will continue operation for the foreseeable future.

Asset

An accounting element characterized by a past activity or event, monetary value, economic usefulness or service potential, and legal capacity of the owner.

Liability

An accounting element representing an obligation with monetary value where the obligation to settle cannot be avoided.

Capital

An accounting element representing the claim of the owner or owners over the business enterprise's assets.

Income

A temporary or nominal account representing activities or events that result in the inflow of assets and/or outflow of liabilities, increasing capital; encompasses both revenue and gain.

Expense

A temporary or nominal account representing activities or events that result in the outflow of assets and/or inflow of liabilities, decreasing capital; encompasses both expense and loss.