Basic Business Environment and Financial Accounting Reviewer

Vocabulary flashcards covering business environment concepts, organizational structures, financial reporting standards, the conceptual framework, and basic accounting processes.

Business

An organization or activity that provides goods and/or services to people.

Service Business

A type of business that provides services instead of physical products.

Merchandising Business

A type of business that buys products and resells them at a higher price.

Manufacturing Business

A type of business that makes products from raw materials and sells finished products.

Hybrid Business

A business that combines service, merchandising, and manufacturing activities.

Public Sector

An operating sector that is owned or controlled by the government.

Private Sector

Privately owned businesses, usually operating for profit.

Sole Proprietorship

A business structure owned and operated by one person.

Partnership

A business form where two or more people contribute money or property to a common fund and share profits (Art. 1767, Civil Code).

General Partners

Partners who join business operations and are liable for business debts.

Limited Partners

Partners who invest capital only, have no operations involvement, and whose liability is limited to their capital.

Limited Liability Partnership (LLP)

A partnership structure where partners are shielded from debts and from other partners' actions.

Corporation

A large business owned by shareholders.

C Corporation

A corporation whose income is taxed to the corporation itself, not to the shareholders.

Foreign Corporation

A corporation registered in one state or country but authorized to do business in another.

RA 9298

The Philippine Accountancy Act of 2004, which replaced PD 692.

Professional Regulatory Board of Accountancy (BOA)

The accounting regulatory body composed of 1 Chairman and 6 members.

CPA Exam Passing Requirement

Requires an average grade of $75\%$ across 6 subjects, with no grade below $65\%$.

Conceptual Framework (CF)

A set of agreed concepts and principles that guide financial accounting and standard development.

Relevance

A fundamental qualitative characteristic meaning financial information can influence user decisions.

Faithful Representation

A fundamental qualitative characteristic requiring information to be complete, neutral, and free from error.

Asset (Conceptual Framework)

A present economic resource controlled by the entity as a result of past events.

Liability (Conceptual Framework)

A present obligation of the entity to transfer an economic resource as a result of past events.

Equity

The residual interest in the assets of the entity after deducting all its liabilities.

Statement of Financial Position

A balance sheet showing Assets, Liabilities, and Equity at a specific date.

Current Assets

Assets that are convertible to cash within $1\,\text{year}$.

Recognition

The process of including an item in the Statement of Financial Position or Performance if it meets the element definition.

Derecognition

The removal of all or part of a recognized Asset or Liability from the financial statements.

Historical Cost

An entry value measurement basis reflecting the original cost of acquiring/creating an asset or taking a liability.

Fair Value

A current value measurement basis representing the price in a market transaction.

Basic Accounting Equation

$$\text{Assets} = \text{Liabilities} + \text{Equity}$$

Journal

Known as the book of original entry used to record accounting transactions.

General Ledger

A record that organizes journal entries into 5 accounts: Assets, Liabilities, Equity, Revenue, and Expenses.

Cash Equivalents

Short-term, highly liquid investments readily convertible to known cash amounts with $3\,\text{months}$ or less maturity from acquisition date.