Generally Accepted Accounting Principles and Financial Reporting Concepts

These flashcards cover the Conceptual Framework of Financial Reporting, the 10 overarching principles of GAAP, core practical accounting concepts, and the Philippine Financial Reporting Standards (PFRS) based on the Week 2 lecture transcript.

THE CONCEPTUAL FRAMEWORK OF FINANCIAL REPORTING

A complete, comprehensive and single document promulgated by the International Accounting Standards Board that summarizes the terms and concepts underlying the preparation and presentation of financial statements for external users.

Completeness

A component of the Conceptual Framework where all necessary information are well-presented in an orderly manner.

Neutrality

A component of the Conceptual Framework requiring financial reports to be objective, impartial, and free from bias.

Free from error

Means that there are no errors or omissions in the description of a financial phenomenon, and no errors were made in the selection and application of the process used to produce the report.

Principle of Regularity

The GAAP principio stating that accountants must strictly adhere to rules and regulations at all times.

Principle of Consistency

Requires that the same accounting standards be applied across all reporting periods to ensure data comparability.

Principle of Sincerity

The principle that accountants must provide an unbiased, accurate, and completely honest depiction of a company’s finances.

Principle of Permanence of Methods

Ensures internal procedures used in financial reports remain uniform so that different periods can be reliably compared.

Principle of Non-Compensation

The requirement that financial books transparently report all assets and liabilities without offsetting or hiding negative entries behind positive ones.

Principle of Prudence

The principle that financial reporting must be factual and realistic, eliminating speculative numbers or wishful forecasting.

Principle of Continuity

The assumption that asset valuations operate under the premise that the business will remain operational and will not face imminent liquidation.

Principle of Periodicity

Requires all accounting entries and revenues to be cleanly allocated into standard timeframes, such as fiscal quarters or years.

Principle of Materiality

States that financial statements must fully disclose all significant monetary facts that could alter an investor's assessment.

Principle of Utmost Good Faith

A principle where all participating parties are legally assumed to be acting with genuine honesty and fairness.

Accrual Principle

A concept where the effects of transactions and other events are recognized when they occur and not as cash or its equivalent is received or paid on the period to which they relate.

Matching Principle

Requires companies to pair expenses with their related revenue streams in the exact same reporting period.

Historical Cost Principle

The standard that assets must be recorded using their original purchase price rather than fluctuating market rates.

Economic Entity Principle

The concept that business transactions must be entirely separate from the personal finances of owners or stakeholders.

Monetary Unit Principle

The requirement that all logged records must be limited to items that can be expressed in a stable, unified currency.

Going Concern Assumption

The assumption that financial statements are prepared with the expectation that an enterprise will continue in operation for the near future.

Time Period Assumption

The concept that requires the indefinite life of the enterprise be divided into equal intervals of time called time periods or accounting periods.

Full PFRS

A framework patterned exactly after full IFRS, required for large, publicly accountable entities such as banks, insurance companies, and public utilities.

PFRS for SMEs

A simplified Philippine Financial Reporting Standard framework for Small and Medium-sized Entities that do not have public accountability but publish general-purpose financial statements.

PFRS for Small Entities

A reporting framework tailored specifically for micro-businesses and smaller entities with minimal complexity.