Chapter 1: Accounting and Its Environment

Vocabulary-style flashcards covering the definitions of accounting, types of business, forms of organization, and fundamental concepts as presented in the lecture notes.

Accounting (Art Definition)

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.

Business transactions

The economic activities of a business recorded as historical events to aid management in planning, control, and decision-making and to comply with regulations.

Recognition issue

The decision an accountant must make regarding when a business transaction occurred.

Valuation issue

The decision an accountant must make regarding what value to place on a business transaction.

Classification issue

The decision an accountant must make regarding how the various components of a business transaction should be classified.

Classification

The phase of accounting that reduces the effects of numerous transactions into useful groups or categories.

Summarization

The process of condensing financial data, achieved through the preparation of financial statements that summarize transaction effects during a specific period.

Internal Users

Individuals directly involved in managing the business, such as business owners, the board of directors, and managerial personnel.

External Users

Individuals or entities not directly involved in managing the business, including investors, lenders, creditors, government agencies, customers, and the public.

Service Business

A business that offers professional skills, expertise, advice, or lending services as its main product rather than physical goods.

Merchandising Business

Also known as a trading business, this type of business buys and sells goods without changing their physical form.

Manufacturing Business

A business that buys raw materials and processes them into a final product.

Sole Proprietorship

A form of business organization owned by one person called the sole proprietor.

Partnership

A business owned and operated by two or more persons who contribute money, property, or industry to a common fund with the intention of dividing profits.

Corporation

An artificial being created by operation of law, having the rights of succession and powers authorized by law, owned by stockholders.

Cooperative

A business owned by more than one individual and formed in accordance with The Philippine Cooperative Code of $2008$, whose owners are called members.

Micro enterprises

Enterprises with assets, before financing, of $P3,000,000$ or less and employing not more than $9$ workers.

Small enterprises

Enterprises with assets, before financing, of above $P3,000,000$ to $P15,000,000$ and employing $10$ to $99$ workers.

Medium enterprises

Enterprises with assets, before financing, of above $P15,000,000$ to $P100,000,000$ and employing $100$ to $199$ workers.

Entity Concept

The accounting concept where an organization stands apart from other organizations and individuals as a separate economic unit.

Going Concern

The assumption that the reporting entity will continue in operation for the foreseeable future without the intention or need to enter liquidation.