Financial Accounting and Reporting (FAR) Practice Flashcards

These vocabulary flashcards cover the key concepts of the accounting profession, standard-setting bodies, the accounting process, and the Revised Conceptual Framework for Financial Reporting.

Accounting (AAA definition)

The process of identifying, measuring, and communicating economic information to permit informed judgment and decision by users of the information.

Identifying

The analytical component of accounting involving the analysis of events to determine if they should be recognized as accountable events or disclosed as non-accountable events.

Measuring

The technical component of accounting which involves determining the monetary amounts at which accounts are to be recognized and carried in the financial statements.

Communicating

The formal component of accounting which involves preparing and distributing accounting reports to users, including recording, classifying, and summarizing.

Professional Regulatory Board of Accountancy (PR-BOA)

The body authorized by law to promulgate the rules and regulation of RA $9298$, composed of $1$ chairman and $6$ members appointed by the PH President.

Qualification of BOA Member

A natural-born citizen and resident of PH, a duly-registered CPA with at least $10$ years of experience, of good moral character, and has no pecuniary interest in educational institutions at the time of appointment.

Philippine Financial Reporting Standards (PFRS)

Principle-based guiding principles for general-purpose financial statement preparation, setting requirements for recognition, measurements, presentation, and disclosures.

Financial and Sustainability Reporting Standards Council (FSRSC)

The current standard-setting body in the PH that succeeds the ASC; its chairman must be a senior practitioner in any scope of practice serving a $3$-year term.

Philippine Interpretations Committee (PIC)

A committee created by the FSRSC to issue interpretations and authoritative guidance on issues likely to receive divergent treatment.

IFRS Foundation Trustees

The body that raises money for the organization and appoints Board members, staff, and members of advisory bodies.

Monitoring Board

The body that oversees and approves the IFRS Foundation Trustees to assure public accountability through a formal reporting line.

International Accounting Standards Board (IASB)

The international standard-setting body composed of $16$ members that prepares and issues international accounting standards.

IFRS Interpretations Committee (IFRIC)

A body appointed by the trustees that serves to interpret existing standards and develops IFRICs for approval by the IASB.

General Journal

A journal used for recording non-routine or non-repetitive transactions.

Special Journals

Journals used for repetitive transactions, including the Sales Journal, Purchases Journal, Cash Receipts Journal, and Cash Disbursements Journal.

Permanent (Real) Accounts

Accounts that are not closed at year-end, including adjunct, contra, and valuation accounts.

Temporary (Nominal) Accounts

Accounts that are closed every year-end.

Transplacement

An error revealed by the trial balance where a decimal point is misplaced, such as $1,000$ becoming $10,000$.

Transposition

An error revealed by the trial balance where the order of digits is accidentally reversed, such as $1,234$ becoming $1,243$.

Accruals

Late cash flows representing income earned but not received or expenses incurred but not paid.

Deferrals

Early cash flows representing income received but not earned (unearned) or expenses paid but not incurred (prepaid).

Going Concern

The underlying assumption of the Revised Conceptual Framework that the entity will continue in operation for the foreseeable future.

Relevance

A fundamental qualitative characteristic where information is capable of making a difference in a decision through predictive or confirmatory value.

Faithful Representation

A fundamental qualitative characteristic requiring a depiction to be complete, neutral, and free from error, emphasizing substance over form.

Verifiability

An enhancing qualitative characteristic where different knowledgeable and independent observers can reach a consensus.

Comparability

An enhancing qualitative characteristic that enables users to identify similarities and differences between sets of economic phenomena across entities.

Consistency

The means to achieve comparability by using the same methods for the same items across different periods.

Asset

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

Liabilities

Present obligations of the entity to transfer an economic resource as a result of a past event.

Equity

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

Income

Increases in assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from holders of equity claims.

Expenses

Decreases in assets or increases in liabilities that result in decreases in equity, other than those relating to distributions to holders of equity claims.

Historical Cost

A measurement basis using the transaction price at the time of initial recognition.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Value in Use (VIU)

The present value of the cash flows that an entity expects to derive from the use of an asset and from its ultimate disposal.

Current Cost

The cost of an equivalent asset at the measurement date, comprising the consideration that would be paid plus transaction costs.

Fulfillment Value

The present value of the cash flows that an entity expects to transfer as it fulfills a liability.

Financial Capital

A capital concept viewed as invested money or purchasing power, typically measured at historical cost.

Physical Capital

A capital concept viewed as the entity's productive capacity, measured at current cost.