BA 99.1 - Midterms Review #2

the philippine accountancy act of 2004

republic act 9298 is the law regulating the practice of accountancy in the philippines. another name for which is?

american institute of certified public accountants (AICPA)

accounting is 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

1. identifying

2. measuring

3. recording

4. communicating

what are the essential elements of accounting?

accountable events

economic events which affect the assets, liabilities, equity, income or expenses of a business

financing activities

this activity involves acquiring of financial resources from financial markets to obtain other resources used to produce goods and services

operating activities

this involves use of resources to design, produce, distribute and market goods and services. This also includes research and development, design and engineering, purchasing, human resources, production, distribution, marketing, selling, and servicing.

basic objective of accounting

to provide quantitative financial information about a business that is useful to statement users particularly owners and creditors, in making economic decisions

RA 9298

the law that regulates the practice of accountancy in the philippines

government accounting

refers to the accounting for the government and its instrumentalities, focusing attention on the custody of public funds, the purpose to which those funds are committed, and the responsibility and accountability of the individuals entrusted with those funds.

public accounting

the field of accounting that is composed of individual practitioners, small accounting firms and large multinational organizations that render independent and expert financial services to the public

bookkeeping

this refers to the process of recording the accounts or transactions of an entity

manufacturing entity

type of business organization which activities are designing products, aggregating components and assembling finished products

partnership

this is a form of business organizations composed of two or more partners

luca pacioli

who is the father of modern accounting?

accrual accounting

depicts the effects of transactions and other events and circumstances on an entity’s economic resources and claims in the periods in which they occur even if the resulting cash receipts and payments occur in a different period

general purpose financial statements

financial statements intended to meet the needs of users who are not in the position to require an entity to prepare reports tailored to their particular information needs

cause-and-effect association/strict matching principle

under this principle, expenses are recognized only when the associated revenues are recognized

faithful representation

this characteristic requires that descriptions and figures must match what really happened or that effects transactions and events shall be properly accounted for

relevance

these are the qualitative characteristics that relate to the substance or content of the financial information

accounting/separate entity

this assumption prohibits the merging of the personal transactions of the owners, managers and employees who constitute the entity from the entity’s transactions

conceptual framework

this is a summary of the terms and concepts that underlie the preparation and presentation of financial statements for external users

accounting assumptions/postulates

these serve as the foundation or bedrock of accounting in order to enhance the understanding and usefulness of the financial statements

P450,000

an entity has a total liability of P360,000 and total equity of P90,000. How much are the total assets?

P270,000

an entity has total assets of P360,000 and total equity of P90,000. How much are the total liabilities?

P101,000

an entity has a beginning equity of P123,000. If the total income for the period is P59,000, while the total expenses are P81,000, how much is the ending balance of equity?

P650,000

an entity had a total liability of P340,000 at the end of the year. The beginning equity is P280,000. If during the year, the entity earned income of P420,000 and incurred expenses of P390,000, how much is the ending balance of total assets?

P35M profit

at year-end, entity A’s total assets and total liabilities are P180M and P70M, respectively. if entity A had a beginning equity of P75M, and there were no contributions from, or distributions to, the owner during the period, how much profit (loss) did entity A earn (incur) during the year?

assets = liabilities + equity

the accounting equation

fianncial statement

it is known as the end product of accounting process

1. financial position

2. financial performance

3. changes in equity

4. cash flows

5. notes to financial statement

what are the 5 sets of Financial Statement?

1. assets

2. liabilities

3. equity

what are the 3 elements of Financial Statement present in the balance sheet?

1. income

2. expenses

what are the 2 elements of Financial Statement present in income statement?

chart of accounts

it is the list of all accounts

1. analyze

2. journalizing

3. posting

4. trial balance

what are the steps in the recording phase of accounting cycle?

journal

it is also known as book of original entries

1. general journal

2. special journal

what are the 2 types of journals?

trial balance

it is a control device that helps minimize accounting errors

footing

it is the summing of column of numbers vertically

cross footing

it is the summing of column of number horizontally

real or permanent account

this account is presented in cumulative balances

adjunct account

type of account used in accounting to supplement or adjust the balance of a related account

contra account

type of account that carries a balance opposite to the normal balance of its related account

unadjusted and adjusted trial balance

this trial balance contains real and nominal and mixed accounts

post closing trial balance

this trial balance contains real account only