Basic Financial Accounting and Reporting – Accounting and Its Environment (VOCABULARY Flashcards)

Vocabulary flashcards covering key concepts, terms, and frameworks from the Accounting and Its Environment chapter.

Accounting

A service activity and information system that identifies, measures, records, and communicates financial information to aid economic decisions.

Language of business

Accounting is considered the language of business because it communicates financial information to decision-makers.

Double-entry bookkeeping

A bookkeeping system where every transaction has corresponding debit and credit entries, keeping the accounting equation in balance.

Fra Luca Pacioli

Often called the father of double-entry bookkeeping; described the Italian method in Summa de Arithmetica (1494).

Method of Venice

The Italian bookkeeping practices described by Pacioli; not a new invention but the description of prevailing methods.

Primitive accounting

Early record-keeping using tokens and clay tablets dating back to ancient Mesopotamia and other civilizations.

Memorandum (Summa context)

Chronological narrative record of a transaction kept before journal entries.

Journal

Merchant’s private book recording transactions in one currency and in chronological order.

Ledger

An alphabetical listing of accounts with running balances used to prepare financial statements.

Entity concept

The accounting principle that a business is a separate economic unit from its owners.

Periodicity concept

The idea that a business's life can be divided into regular reporting periods for timely information.

Stable monetary unit concept

Assumes the currency used (e.g., Philippine peso) has stable purchasing power for recording.

Going concern

Assumes the entity will continue to operate in the foreseeable future unless evidence suggests otherwise.

GAAP

Generally Accepted Accounting Principles; the standards guiding acceptable accounting practices.

Revenue recognition principle

Revenue is recognized when goods are delivered or services are performed.

Expense recognition principle

Expenses are recognized in the period in which related revenues are earned or when consumed.

Historical cost

Assets are recorded at their original acquisition cost rather than current market value.

Adequate disclosure

All information necessary for users to understand and evaluate the financial statements is disclosed.

Materiality

Only information significant enough to influence decisions should be disclosed.

Consistency

Using the same accounting methods from period to period unless a justified, disclosed change is made.

Auditing

Independent examination of financial statements to ensure fairness and reliability; external vs internal audits.

Bookkeeping

Routine recording of financial data; the data are later classified and summarized for reporting.

Depreciation

Allocation of the cost of a tangible asset over its useful life for accounting and tax purposes.

Quipu

Inca system of knotted cords used to record information; an early form of accounting records.

ASEAN

Association of Southeast Asian Nations; a regional bloc aiming for a stable, prosperous economic region with four pillars.

Four Pillars of ASEAN Economic Community

Single market and production base; Competitive economic region; Equitable economic development; Integration into the global economy.

MRAs (Mutual Recognition Arrangements)

Agreements allowing professional services (e.g., accounting) to be recognized across ASEAN member countries.

ACPA (ASEAN Chartered Professional Accountant)

Title granted to recognized CPAs under ASEAN MRAs, enabling mobility across member states.

AQRF (ASEAN Qualifications Reference Framework)

A framework to compare qualifications across ASEAN countries to facilitate labor mobility.

Core Competencies Framework for Accountants

Defined knowledge, skills, and values needed for entry into the Philippine accountancy profession.

Sole Proprietorship

A business owned by one person who bears unlimited liability; simple to form and operate.

Partnership

A business owned by two or more persons who share profits and losses; partners are personally liable.

Corporation

A separate legal entity owned by shareholders; owners have limited liability.

MSMEs

Micro, small, and medium enterprises; a large segment of the economy with specific asset and employee thresholds.

TRAIN Law/CREATE Act

Philippine laws affecting income taxation (TRAIN) and related corporate tax reforms (CREATE).

PICPA/BOA/PRC

Professional bodies and regulatory authorities in the Philippines that oversee accountancy practice and licensure.

Code of Ethics for Professional Accountants (Philippines)

IFAC-based framework of fundamental principles (Integrity, Objectivity, Competence and Due Care, Confidentiality, Professional Behavior) guiding CPAs.

Sarbanes-Oxley Act (SOX)

US law (2002) enhancing corporate governance, auditor independence, and financial disclosures; has international influence.