Forms of Business Organization and Accounting Principles

This flashcard set covers the four forms of business organization, types of business activities, and basic accounting concepts and principles as presented in the lecture.

Sole/Single Proprietorship

A business owned and managed by one person who controls all decisions and keeps all profits, commonly known as the simplest and most common type of business.

Partnership

A business owned by two or more persons who agree to share profits and responsibilities, governed by an agreement known as the Articles of Partnership.

Articles of Partnership

The official agreement that governs the operation and profit-sharing of a partnership.

Corporation

A business created under the Corporation Code of the Philippines that exists as a separate legal entity from its owners, managed by a Board of Directors.

Stockholders

The owners of a corporation who own shares of stock and benefit from limited liability, which is restricted to their actual investment.

Cooperative

An association of people with common interests who join together to meet economic, social, or cultural needs, regulated by the Cooperative Development Authority (CDA).

Cooperative Development Authority (CDA)

The specific regulatory body responsible for the oversight of cooperatives in the Philippines.

Service Business

A type of business activity that provides skills, advice, or services to customers rather than physical products, such as banks or law firms.

Merchandising Business

A "buy and sell" business activity that purchases goods at wholesale and sells them at retail for a profit.

Manufacturing Business

A type of business activity that involves converting raw materials into finished products, such as shoe factories or car plants.

Business Entity Principle

An accounting principle stating that a business is a separate entity and its transactions should be kept distinct from the owner's personal life.

Going Concern Principle

The accounting assumption that a business will continue to operate indefinitely into the future.

Time Period Principle

The concept of dividing business activities into specific reporting periods, such as monthly or yearly cycles.

Monetary Unit Principle

The requirement that all business transactions must be recorded in a single currency, such as the $\text{Peso}$.

Objectivity Principle

The principle that accounting records must be based on objective evidence, such as receipts and vouchers, rather than opinions.

Cost Principle

The accounting rule that assets should be recorded at their original purchase cost instead of their current market value.

Accrual Principle

An accounting principle where income is recorded when earned and expenses are recorded when incurred, regardless of when cash is actually exchanged.

Matching Principle

The requirement that expenses incurred must be matched and reported in the same period as the revenue they helped generate.

Disclosure Principle

The requirement that all relevant and important financial information must be reported to ensure transparency.

Conservatism Principle

The principle that in cases of doubt, one should understate assets and income while overstating expenses and liabilities.

Materiality Principle

The practice of recording an item as an expense if its amount is too small to influence the decisions of a financial statement user.