far

Accounting

The language of business and a service activity that provides quantitative financial information useful for making economic decisions.

Objective of Accounting

To provide financial information for users of financial statements to make informed judgments and better decisions.

Internal Users

Individuals such as owners, potential investors, management, and employees who utilize financial information.

External Users

Entities such as customers, creditors, lenders, potential investors, government units, and the general public who rely on financial information.

Republic Act No. 9298

The law regulating the practice of accountancy in the Philippines.

Board of Accountancy

The body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.

Sectors in Accounting Practice

The divisions of accounting practice, which include Public Sector, Commerce and Industry, Education, and Government.

Process of Accounting

The steps of identifying, measuring, and communicating economic information to financial statement users.

Accounting vs Bookkeeping

Accounting involves the overall process of identifying, classifying, summarizing, and communicating financial information, whereas bookkeeping focuses on recording financial transactions.

Accounting vs Auditing

Accounting is the internal process of preparing financial statements, while auditing is the external examination of those statements to provide an opinion on their fairness.

Generally Accepted Accounting Principles (GAAP)

A set of rules, principles, standards, and conventions used in preparing financial statements.

Philippine Financial Reporting Standards (PFRS)

A specific set of accounting standards issued in the Philippines that constitutes the GAAP.

Conceptual Framework

A summary of terms and concepts that underlie the preparation and presentation of general purpose financial statements.

Objectives of Financial Reporting

To provide financial information for decision making and assist in understanding financial highlights and ratios.

Basic Accounting Principles and Assumptions

Fundamental principles including Economic Entity Principle, Monetary Unit Assumption, Full Disclosure Principle, and others guiding accounting practices.

Economic Entity Principle

The concept that a business is separate and distinct from its owners.

Monetary Unit Assumption

The principle that all transactions are recorded in the same currency, assuming the value of currency remains static.

Specific Time Period Assumption

The concept that an entity's indefinite life is divided into specific accounting periods.

Full Disclosure Principle

The requirement to disclose all relevant information in financial statements.

Going Concern Assumption

The assumption that a business will continue to operate indefinitely unless evidence suggests otherwise.

Matching Principle

The principle of matching revenue with related expenses for accurate financial reporting.

Accrual Basis

Revenue and expenses are recognized when earned or incurred, regardless of cash flow.

Materiality Principle

The relevance of an item in the context of financial reporting, based on its nature or magnitude.

Conservatism/Prudence

The guideline to choose the least optimistic alternative when faced with uncertainty in accounting.

Reporting Entity

A legal entity that is required or chooses to prepare financial statements.

Reporting Period

The specific time frame for which financial statements are prepared.

Basic Accounting Equation

Assets = Liabilities + Equity.

Expanded Accounting Equation

Assets = Liabilities + Equity + Income - Expenses.

Books of Accounts

The records used in accounting, including journals, ledgers, and trial balances.

Journal

A chronological record of transactions, divided into general and special journals.

Ledger

A summary of all business transactions affecting specific accounts.

Trial Balance

A list of general ledger accounts and their respective open balances to verify that total debits equal total credits.