Accounting and Business Environment Vocabulary

Comprehensive vocabulary flashcards covering basic accounting definitions, professional ethics principles, Filipino regulatory agencies, forms of business organization, accounting assumptions, and financial statement components.

Accounting

The process of recording, classifying, summarizing, & interpreting financial data – a basis for making decisions; famously known as the Language of business.

Financial Accounting

A branch of accounting that deals with the accumulation (gathering) & processing of information that will be contained in financial statements.

Managerial Accounting

A branch of accounting that has to do with providing information to help meet the needs of managers inside an organization.

Cost Accounting

A branch of accounting that provides information to management about the different costs incurred by a business that is necessary in the planning & evaluation activities.

Assurance & Auditing

A related field of accounting which deals with reporting or improving the quality of information being provided by a certain party to another.

Taxation

Deals with the power of the government to impose burden or charges upon persons and property.

Integrity

A fundamental code of ethics principle requiring a CPA to be straightforward & honest in rendering professional services.

Objectivity

A fundamental code of ethics principle requiring a CPA to be fair & not allow prejudice or bias, conflict of interest or influence of others in performing professional services.

Professional Competence & Due Professional Care

A fundamental principle requiring CPAs to maintain professional knowledge & skill at a level required to perform professional services.

Confidentiality

A fundamental principle requiring a CPA to respect the confidentiality of information acquired during the course of performing professional services.

Professional Regulation Commission (PRC)

Designated by the government through RA 8981 to oversee the supervision of all the practices of the different professions such as Medicine, Engineers, Accountants, etc.

Board of Accountancy (BOA)

An organization created under RA 9298 in-charge of standardizing & regulating accounting education, as well as supervising, controlling, and regulating accountancy practice in the Philippines.

Securities and Exchange Commission (SEC)

A government agency tasked with strengthening the corporate & capital market infrastructure in the Philippines.

Bureau of Internal Revenue (BIR)

A government agency tasked with raising internal revenue taxes.

Bangko Sentral ng Pilipinas (BSP)

A government agency tasked with promoting & maintaining price stability, conducting sound monetary policy & supervision of financial institutions under its jurisdiction as provided by the Central Bank Act.

Commission on Audit (COA)

One of the constitutional commissions responsible for ensuring that public funds are being spent economically, efficiently & effectively.

Insurance Commission (IC)

A government agency that is in-charge of supervising the insurance industry.

Department of Trade & Industry (DTI)

A government agency charged with creating a business-friendly environment within & outside the Philippines.

Business

An organization that provides goods and/or services with an objective of earning profit.

Service Business

A type of business that requires one's skills or talent being rendered for a fee.

Merchandising Business

Involves buying of goods and selling the same goods with little or no alteration, such as a bookstore or sari-sari store.

Manufacturing Business

A type of business that requires purchasing raw materials and putting them together in a production process to produce a totally different finished good, such as a bakery.

Sole or Single Proprietorship

A business being owned by only one person, offering simple startup and full profit retention, but with unlimited owner debt liability.

Partnership

Under Art. 1767, an agreement where two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing profits among themselves.

Corporation

Under Sec. 2, BP: Corporation Code of the Phils., an artificial being created by operation of law, having the right of succession and powers authorized by law.

Strategy

A unique approach that gives a certain entity an edge (advantage) over other entities in accomplishing goals and objectives.

Business Risk

Refers to risks that are present every time a business is put up and decisions are made by management and business stakeholders.

Information Risk

Refers to risks that exist when certain information is given to decision makers which may or may not be relevant and reliable.

Repetitive Decisions

Those decisions that are expected to be made on a cyclical basis during the operating cycle of a given business, such as granting credit to customers.

Non-Repetitive Decisions

Decisions that are expected to be made only once and are not expected to occur again, such as dropping a product or buying vs renting a building.

Business Transaction

An accounting term for events occurring with third parties that have monetary and tangible economic value to the company, impacting its financial position.

Accounting Assumptions

A set of rules ensuring business operations conform to FASB standards, based on fundamentals like accrual, consistency, reliability, entity, going concern, and historical cost.

Reliability Assumption

Mandates companies to record only transactions that can be easily proven/verified through invoices, receipts, billing statements, and bank statements.

Consistency Assumption

Requires companies to use a consistent method of accounting across all accounting periods to enable easy comparison of financial statements.

Time Period Assumption

States that accounting practices and methods used by an entity must be reported and maintained for a particular, consistent period.

Going Concern Assumption

Also termed continuity assumption; assumes that a company will continue to deliver business operations and exist for an unforeseeable future without going bankrupt.

Economic Entity Assumption

Also known as the business entity assumption; separates the owner's personal financial records from the company's financial records.

Money Measurement Assumption

Concept stating that every transaction worth recording must be recorded and expressed in monetary terms.

Accounting Equation

The fundamental mathematical principle of accounting and balance sheet structure expressed as $\text{Assets} = \text{Liabilities} + \text{Shareholder's Equity}$.

Balance Sheet

Also known as the statement of financial position or statement of net worth; displays a company's total assets and how they are financed through debt or equity.

Double-Entry Accounting

A bookkeeping system where every transaction affects at least two accounts to keep the accounting equation in balance.

Debit (DR)

Refers to an increase in an asset account or a decrease in a liability or shareholders' equity account.

Credit (CR)

Refers to a decrease in an asset account or an increase in a liability or shareholders' equity account.

Assets

Resources owned by a company that have economic value, facilitate daily operations, generate future cash flows, or reduce expenses.

Current Assets

Short-term assets used for daily operations that can be converted into cash within one operating year, including cash, accounts receivable, inventory, supplies, and prepaid expenses.

Fixed Assets

Long-term tangible assets (held over 1 year) listed as PPE, including company vehicles, land, buildings, equipment, and furniture.

Liabilities

Present economic obligations of an enterprise arising from past transactions, requiring an outflow of resources embodying economic benefits upon settlement.

Accounts Payable

Indebtedness arising from the purchase of goods, materials, supplies, or services in the normal course of business operations.

Accrued Expenses

Concept in accrual accounting referring to expenses that are recognized when incurred but not yet paid, such as Salaries Payable and Utilities Payable.

Unearned Revenues

Advanced payments received from customers requiring settlement through delivery of goods or services in the future.

Equity

An owner's or shareholder's share of business assets, representing net residual value after liquidating assets and paying off all debt.

Capital

Financial assets and resources available to conduct daily business operations, such as funds in bank accounts or business loans.

Additional Paid-in Capital

The amount received from stockholders over the face value of stock, also known as stock premium.

Retained Earnings

The accumulated profits of a business on a particular date, including any reserves created out of such accumulated profits.

Expenses

Decreases in economic benefits during an accounting period via asset decreases or liability increases that result in equity decreases (other than owner distributions).

Owner's Drawing Account

An account used to record the amounts withdrawn from a sole proprietorship by its owner.

Accounting

The process of recording, classifying, summarizing, and interpreting financial data to serve as a basis for making decisions.

Financial Accounting

A branch of accounting that deals with the accumulation and processing of information that will be contained in financial statements.

Managerial Accounting

A branch of accounting that provides information to help meet the needs of managers inside an organization.

Cost Accounting

A branch of accounting providing information to management regarding costs incurred by a business, necessary for planning and evaluation activities.

Assurance and Auditing

A field related to accounting that deals with reporting or improving the quality of information provided by one party to another.

Taxation

A field dealing with the power of the government to impose burdens or charges upon persons and property.

Integrity

A fundamental ethics principle requiring a CPA to be straightforward and honest in rendering professional services.

Objectivity

A fundamental principle requiring a CPA to be fair and not allow prejudice, bias, conflict of interest, or influence of others to override professional services.

Professional Competence and Due Professional Care

The duty of a CPA to maintain ongoing professional knowledge and skill at a level required to render competent service.

Confidentiality

The requirement for a CPA to respect the privacy of information acquired during the course of performing professional services.

Professional Behavior

The requirement for a CPA to act in a manner consistent with the good reputation of the profession.

Technical Standards

The requirement that a CPA carry out professional services in accordance with relevant standards issued by authorized organizations or mandated by law.

Professional Regulation Commission (PRC)

A commission designated under RA 8981 to oversee the supervision of all professional practices in the Philippines.

Board of Accountancy (BOA)

An organization created under RA 9298 in charge of standardizing accounting education and regulating accountancy practice in the Philippines.

Securities and Exchange Commission (SEC)

A government agency tasked with strengthening the corporate and capital market infrastructure in the Philippines.

Bureau of Internal Revenue (BIR)

A government agency tasked with raising internal revenue taxes in the Philippines.

Bangko Sentral ng Pilipinas (BSP)

A government agency tasked with promoting price stability, monetary policy, and supervision of financial institutions under the Central Bank Act.

Commission on Audit (COA)

A constitutional commission responsible for ensuring public funds are spent economically, efficiently, and effectively.

Insurance Commission (IC)

A government agency in charge of supervising the insurance industry.

Department of Trade and Industry (DTI)

A government agency charged with creating a business-friendly environment within and outside the Philippines.

Business

An organization that provides goods and/or services with the ultimate objective of earning profit.

Service Business

A type of business that requires rendering skills or talents in exchange for a fee.

Merchandising Business

A type of business involving buying goods and selling the exact same goods with little or no alteration.

Manufacturing Business

A type of business that purchases raw materials and processes them together to yield a completely different finished good.

Sole Proprietorship

A form of business organization owned by only one person who retains unlimited liability over business debts.

Partnership

A business structure defined in Art. 1767 where two or more persons bind themselves to contribute money, property, or industry to a common fund to divide profits.

Corporation

An artificial being created by operation of law (Sec. 2, BP: Corporation Code of the Phils.) having succession rights and powers authorized by law.

Strategy

A unique approach that gives an entity a competitive advantage over others in accomplishing goals and objectives.

Risk

The uncertainty that a desired outcome may not materialize.

Business Risk

Risks present whenever a business is established and management decisions are made.

Information Risk

Risks existing when provided information given to decision makers may not be relevant or reliable.

Repetitive Decisions

Decisions expected to be made on a cyclical basis during the operating cycle of a business.

Non-Repetitive Decisions

Decisions expected to be made only once that are not anticipated to recur.

Business Transaction

An event occurring with a third party measurable in monetary terms that has a financial effect on the company.

Accounting Assumptions

A set of rules ensuring operations comply with FASB standards, grounding consistent and reliable financial reporting.

Reliability Assumption

An assumption mandating that companies record only accounting transactions that can be proven via invoices, receipts, or bank statements.

Consistency Assumption

An assumption requiring entities to use a uniform accounting method across periods to allow straightforward financial comparisons.

Time Period Assumption

An assumption stating accounting practices and methods must be maintained and reported for consistent, specific time periods.

Going Concern Assumption

Also called continuity assumption, it assumes a business will continue operations indefinitely and not go bankrupt.

Economic Entity Assumption

Also called business entity assumption, it separates the financial records of the company owner from the financial records of the business itself.

Money Measurement Assumption

A concept stating that every recordable business transaction must be expressed in monetary terms.

Accounting Equation

The fundamental mathematical equation of balance sheet accounting: $\text{Assets} = \text{Liabilities} + \text{Shareholder's Equity}$.

Balance Sheet

A financial statement displaying a company's total assets and how they are financed through debt or equity; also called statement of financial position.

Double-Entry Accounting

A bookkeeping system where every financial transaction affects at least two accounts to maintain balance in the accounting equation.