1. Introduction to Accounting and Business

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29 Terms

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Business

An organization or enterprising entity engaged in commercial, industrial, or professional activities.

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Sole Proprietorship

A business organization owned by one person where the owner keeps all profits and decision-making is simple.

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Partnership

A business organization with two or more owners who share income and capital investment.

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Corporation

A business organization with at least five shareholders, generating more capital and subject to more taxes.

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Service Business

A business that provides services to clients for a fee.

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Merchandising Business

A business that buys goods from suppliers and sells them to customers with a markup.

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Manufacturing Business

A business that purchases raw materials, processes them into finished products, and sells them.

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Accounting

The art of recording, classifying, and summarizing financial transactions to communicate financial information.

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Financial Statements

Reports that provide information about the financial performance and position of a business.

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Internal Users

Individuals or groups within a business organization, such as investors and employees, who use accounting information.

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External Users

Stakeholders outside the business, such as lenders, suppliers, customers, and government agencies, who require financial information.

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Recording

The phase of accounting that involves writing business transactions in a systematic and chronological order.

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Classifying

The phase of accounting where recorded transactions are sorted and grouped according to nature and similarity.

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Summarizing

The phase of accounting that involves summarizing grouped transactions through financial statements.

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Interpreting

The phase of accounting that evaluates the economic performance and condition of the business for decision-making.

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Statement of Comprehensive Income

A financial statement that presents the income generated and expenses incurred by a business.

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Statement of Changes in Owner’s Equity

A financial statement showing the effects of withdrawals, additional investments, and business operations on owner’s equity.

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Statement of Financial Position

A financial statement detailing assets, liabilities, and owner’s equity at a specific time.

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Statement of Cash Flows

A financial statement summarizing how cash is generated and used by a business.

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Basic Accounting

The process of analyzing, recording, classifying, and summarizing business transactions.

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Financial Accounting

Focuses on the preparation and presentation of general-purpose financial statements.

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Cost Accounting

Deals with cost determination and control related to producing goods and services.

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Managerial Accounting

Provides financial and non-financial information needed for planning and control functions of management.

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Auditing

The independent examination of financial statements to express an opinion on their fairness.

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Government Accounting

Also known as "Fund Accounting," it focuses on the utilization of government funds.

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Taxation

Encompasses the preparation of tax returns and determination of tax liabilities for a company.

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Professional Regulation Commission (PRC)

A government agency in the Philippines responsible for licensing various professions, including accountancy.

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Professional Regulatory Board of Accountancy

Supervises the registration, licensure, and practice of accountancy in the Philippines.

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Philippine Institute of Certified Public Accountants (PICPA)

A national organization of all Certified Public Accountants in the Philippines.