BA 99.1: Fundamentals of Accounting Theory and Practice I - Flashcards

Comprehensive vocabulary flashcards covering the origin, definitions, activities, users, business types, ethics, standards, postulates, qualitative characteristics, financial statement elements, recognition rules, and measurement bases from the lecture notes.

Fra Luca Pacioli

A celebrated mathematician in 1494 Venice who wrote the first treatise on systematic bookkeeping entitled 'everything about arithmetic, geometry, proportions and proportionality'.

Double Entry Bookkeeping

A formal account keeping method whose records first appeared in Genoa in 1340 A.D., developed as an outcome of continued efforts to meet the changing necessities of trade.

Cost Accounting

A specialized field of accounting that emerged during the Industrial Revolution (mid-18th to mid-19th century) due to the challenges of costing a large volume of products under the factory system.

Accounting (ASC definition)

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.

Accounting (AICPA 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 financial character and interpreting the results thereof.

Accounting (AAA definition)

The process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by users of the information.

Accounting (Weygandt 2019 definition)

The information system that identifies, records, and communicates the economic events of an organization to intended users.

Single or Sole Proprietorship

A business owned by one individual only, representing the most basic, easiest to organize, and least complicated form of business organization.

Partnership

An association of two or more people who bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves, governed by the Civil Code of the Philippines.

Corporation

An artificial being created by operation of law, having the right of succession and the powers and attributes expressly authorized by law or incident to its existence, owned by shareholders.

Service Business

The simplest form of business operation that renders services to customers or clients in exchange for a fee.

Merchandising Business

A business operation that buys goods or commodities from suppliers and sells the same at a profit without altering their state.

Manufacturing Business

A business operation that actually produces the goods it sells to its customers at a profit.

Ethics in Financial Reporting

The standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or not fair.

GAAP (Generally Accepted Accounting Principles)

Authoritative standards, principles, assumptions, and procedures developed based on experience, research, and study that guide accountants in measuring, recording, and reporting financial activities.

FRSC (Financial Reporting Standards Council)

The body in the Philippines that develops GAAP promulgated as Philippine Financial Reporting Standards (PFRS).

Accounting Assumptions

Basic notions or fundamental premises (also known as postulates) on which the accounting process is based, serving as its solid foundation.

Objectivity

The principle that an accounting transaction should be supported by sufficient evidence to allow two or more qualified individuals to arrive at essentially similar conclusions.

Going Concern Assumption

An underlying assumption stating that the business entity will continue for an indefinite period of time.

Entity Concept

A concept implicit in the going concern assumption stating that the owners and the business are separate and distinct economic units.

Periodicity Concept (Time Period)

A concept implicit in the going concern assumption stating that an entity's life can be subdivided into equal time periods for reporting purposes.

Stable Monetary Unit Concept

A concept implicit in the going concern assumption stating that the currency (e.g., Philippine peso) is a reasonable unit of measure and that its purchasing power is stable.

Conceptual Framework

A summary of the terms and concepts that underlie the preparation of financial statements to provide an overall theoretical foundation for accounting.

Relevance

A fundamental qualitative characteristic defined as the capacity of accounting information to influence a decision.

Faithful Representation

A fundamental qualitative characteristic requiring financial information to reflect what really existed.

Materiality

An ingredient of relevance stating that information is material if its omission or misstatement could influence the decisions of users.

Substance Over Form

A concept inherent in faithful representation requiring transactions to be accounted for in accordance with their economic substance rather than their legal form.

Conservatism (Prudence)

The exercise of caution needed in making estimates, following the principle to anticipate no profits and to provide for all probable and estimable losses.

Statement of Financial Position (SFP)

A financial report (formerly Balance Sheet) that shows the financial position of a business entity at any given time, comprising assets, liabilities, and owner's equity.

Statement of Comprehensive Income

A financial report (Income Statement) that shows the financial or operating performance of a business entity for a given period, comprising revenue, expenses, and profit or loss.

Assets

Resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Liabilities

Present obligations arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits.

Equity

The residual interest in the assets of an entity after deducting all its liabilities.

Income Recognition Principle

The principle stating that income is recognized when earned, regardless of when cash is received.

Expense Recognition Principle

The principle stating that expense is recognized when incurred, regardless of when cash payment is made.

Matching Principle

The principle requiring that costs and expenses incurred in earning revenue shall be reported in the same period as that revenue.

Historical Cost

A measurement basis representing the purchase price paid for an asset at the time of acquisition.

Current Cost

A measurement basis representing the purchase price required to acquire an asset today in the present.

Realizable Value

A measurement basis representing the net amount of cash that would be received if an asset were disposed of today.

Present Value

A measurement basis representing the discounted value of future net cash inflows expected to be generated by an asset or required to settle a liability.