Accounting Principles and Financial Reporting (GAAP, IFRS, Philippines Context)

Vocabulary flashcards covering GAAP, IFRS, Philippine standards, accounting cycles, financial statements, and key concepts from the notes.

GAAP

Generally Accepted Accounting Principles; standard framework of accounting rules, concepts, and procedures for preparing financial statements.

FASB

Financial Accounting Standards Board; private body that sets broad and specific accounting principles in the United States.

SEC

Securities and Exchange Commission; government body that establishes reporting requirements for public companies.

IASB

International Accounting Standards Board; develops IFRS globally to ensure consistency and comparability.

IFRS

International Financial Reporting Standards; global accounting standards emphasizing principles-based guidance.

PFRS

Philippine Financial Reporting Standards; Philippines version of IFRS issued by FRSC and adopted by SEC.

FRSC

Financial Reporting Standards Council; issues PFRS aligned with IFRS.

BOA

Board of Accountancy; regulator of CPAs in the Philippines.

GAAP-US vs IFRS

GAAP-US is rule-based with detailed rules; IFRS is principles-based allowing professional judgment.

Accrual Basis

Revenue is recognized when earned and expenses when incurred, regardless of cash timing.

Deferrals

Revenues or expenses paid or received in advance; recorded as assets or liabilities until earned/incurred.

Accruals

Revenues earned or expenses incurred but not yet recorded; adjusted at period end.

Revenue Recognition Principle

Revenue is recognized when it is earned and realizable.

Matching Principle

Expenses are matched to the revenues they help generate in the same period.

Full Disclosure Principle

Financial statements should disclose all significant information, often via notes.

Monetary Unit Assumption

Transactions are measured and reported in a monetary unit (e.g., pesos, dollars).

Going Concern

Assumes the business will continue operating; assets valued accordingly unless liquidation is planned.

Business Entity Principle

Business is treated as a separate entity from its owners for accounting purposes.

Time Period Assumption

The life of a business can be divided into artificial time periods for reporting.

Cost Principle

Assets are recorded at their actual cost, not revalued to market value.

Objectivity Principle

Financial information is based on objective evidence and free from bias.

Consistency Principle

Use the same accounting methods from period to period for comparability.

Equity

Owner’s residual interest; assets minus liabilities.

Capital / Owner’s Investment

Funds or assets contributed by the owner; part of equity.

Drawings

Owner withdrawals for personal use; reduces owner’s equity.

Retained Earnings

Accumulated profits kept in the business for reinvestment; part of equity.

Common Stock

Equity representing ownership in a corporation; contributed capital by shareholders.

Assets

Resources owned by the business; divided into current and non-current.

Current Assets

Assets expected to be converted to cash within 1 year or operating cycle.

Non-Current Assets

Long-term assets not expected to be converted within 1 year.

Liabilities

Obligations the business owes to others; claims against assets.

Current Liabilities

Obligations due within 1 year or operating cycle.

Non-Current Liabilities

Obligations not due within 1 year; long-term.

Revenues

Income earned from normal operations; increases equity and is recognized when earned.

Expenses

Costs incurred to generate revenues; decreases equity.

Journal

Book of original entry; chronological recording of transactions.

Ledger

Book of final entry; accounts where postings are accumulated.

Debit

Left side of an account; increases assets/expenses or decreases liabilities/equity.

Credit

Right side of an account; increases liabilities/equity or decreases assets/expenses.

Trial Balance

List of all ledger balances; checks that total debits equal total credits.

Unadjusted Trial Balance

Trial balance before adjusting entries are made.

Adjusting Entries

End-of-period entries to update accruals/deferrals and prepare accurate statements.

Accrued Revenues

Revenues earned but not yet received; increase Accounts Receivable and Revenue.

Accrued Expenses

Expenses incurred but not yet paid; increase Expense and Liability (e.g., Salaries Payable).

Prepaid Expenses

Assets paid in advance for future expenses; become expenses as used.

Unearned Revenue

Liability; cash received before service/product is provided; revenue recognized when earned.

Depreciation

Allocation of a long-term asset’s cost over its useful life; recorded as expense.

Accumulated Depreciation

Contra-asset reducing the carrying amount of the related asset.

Inventory Adjustments

Adjustments to ending inventory to determine COGS and net income.

Closing Entries

End-of-period entries to close temporary accounts to permanent accounts.

Post-Closing Trial Balance

Trial balance after closing; lists only permanent accounts.

Reversing Entries

Optional entries at the start of the new period to reverse certain adjustments.

Income Statement

Financial performance over a period; revenues minus expenses; also called P&L.

Balance Sheet

Financial position at a point in time; assets equal liabilities plus equity.

Cash Flow Statement

Shows cash inflows and outflows by operating, investing, and financing activities.

Chart of Accounts

List of all accounts used by the business; organized by category.

Bookkeeping

Recording day-to-day financial transactions.

Double-Entry

Each transaction affects at least two accounts with equal debits and credits.

Single-Entry

Simplified recording lacking formal double-entry bookkeeping.