Accounting and Business Fundamentals Review

A comprehensive set of vocabulary flashcards covering the fundamental principles, formulas, and regulatory aspects of accounting and business operations based on lecture notes.

Net worth

$Assets - Liabilities$; represents real personal wealth or what remains (natira sayo).

Net income

$Revenue - Expense$; also known as Profit.

Return on Equity (ROE)

$$\frac{Net\,Income}{Net\,Worth} \times 100$$

Return on Assets (ROA)

$$\frac{Net\,Income}{Asset} \times 100$$

Ending Capital

$$Beginning\,Capital + Net\,Income - Drawings$$

Cost of Goods Sold (COGS)

$$Beginning\,Inventory + Purchases - Ending\,Inventory$$

Budgeting

One of the 5 core areas of accounting used for future planning.

Bookkeeping

The practice of maintaining journals and ledgers; specifically recording, classifying, and summarizing business transactions.

Financial Accounting and Reporting (FAR)

The preparation of financial statements for stakeholders based on specific principles, procedures, and disclosures.

Financial Analyst

An accounting role that supports economic decisions.

Resource Controls

Processes used to ensure accuracy in business assets.

Service Operation

A type of business providing personal labor, such as law firms, salons, or Grab; Profit = $Service\,Revenue - Cost\,of\,Service$.

Merchandising Operation

A buy and sell business, such as grocery stores or bookstores; Profit = $Sales\,Revenue - Cost\,of\,Sales$.

Manufacturing Operation

A business that converts raw materials into finished products, such as shoe factories or bakeries; Profit = $Sales\,Revenue - Cost\,of\,Goods\,Sold$.

Income Statement

A performance report comparing revenue against costs and expenses.

Statement of Financial Position

Also known as a Balance Sheet; a snapshot showing the relationship $Assets = Liabilities + Equity$.

Statement of Cash Flows

A report detailing where money was obtained and how it was used (operating, investing, and financing).

Revenue

Money earned from products and sales.

Expenses

Deductions from revenue, such as bills.

Reimburse

The act of paying back someone who advanced funds (babayaran yung nag-abono).

Sole Proprietorship

A business with one owner; features easy setup and total profit retention but carries unlimited liability.

Partnership

A business with two owners; features shared capital and labor efficiency but carries unlimited liability for general partners.

Corporation

A separate legal entity owned by shareholders; features limited liability, perpetual existence, and the ability to raise large capital.

Liquidity

The ability of a business to pay short-term debts on time by turning assets into cash.

Solvency

The ability of a company to meet its long-term financial obligations.

Financing Activities

Business activities involving the use of owner's capital or external resources like banks.

Investing Activities

Business activities involving the acquisition of assets for proper operation.

Efficiency

The use of resources at the lowest time, effort, and cost; working smarter.

Effectiveness

The ability to attain goals, meeting output targets, quality standards, and Return on Investment (ROI).

Cost-benefit Principle

An AIS principle stating that system advantages must outweigh the cost of setup and maintenance.

Relevance

An accounting attribute where information is timely and capable of influencing decisions via predictive and feedback value.

Equity

The amount of money belonging to the owner after all debts and obligations are paid; the residual interest in net assets.

Direct Users

Stakeholders such as Managers, Owners, Investors, Lenders, Suppliers, Employees, Customers, and the BIR.

Data gathering

The first phase of AIS processing.

Analyzing & recording

The second phase of AIS processing, often considered part of the bookkeeping stage.

Classifying & storing

The third phase of AIS processing, often considered part of the bookkeeping stage.

Reporting & interpreting

The fourth phase of AIS processing, which precedes decision making.

Official Receipts

Source documents prepared by the Cashier or Collection Officer when cash is received.

Invoices

Source documents prepared by the Sales Officer upon buying or selling goods or services.

Cash Vouchers

Source documents prepared by the Disbursing Officer when making cash payments.

Journal

The book of original entry where transactions are recorded chronologically using debits and credits.

Ledger

The book of final entry that organizes individual journal entries into grouped accounts.

DEA-LER

A journalizing rule where Drawings, Expenses, and Assets increase with Debits; Liabilities, Equity, and Revenue increase with Credits.

Accounts Payable

A liability representing an oral or formal promise to pay for goods or services.

Notes Payable

A written promissory note representing a debt.

Unearned Revenue

A liability representing money received for a service or product that has not yet been provided.

Securities and Exchange Commission (SEC)

Established on October 26, 1936 under C.A. 83 to safeguard public interest of investors in the capital market.

Bangko Sentral ng Pilipinas (BSP)

The body that regulates all banks and financial institutions to maintain peso stability.

Bureau of Internal Revenue (BIR)

The primary agency that determines tax liabilities and statutory compliance such as ITR, VAT, and Percentage Tax.

Generally Accepted Accounting Principles (GAAP)

The rules that ensure consistency, comparability, and transparency in financial reporting.

Business Entity Concept

The assumption that a business is separate and distinct from its owner.

Going Concern

The assumption that a business will continue operating indefinitely.

Accrual Assumption

The rule that income and expenses are recognized in the period they relate to, regardless of cash flow.

Preferential Claim

The legal priority given to creditors to be repaid before stakeholders during liquidation or bankruptcy.

Double Entry Bookkeeping

The principle that for every value received, there is an equal value parted.

Professional Regulation Commission (PRC)

The government body regulating and licensing professions including accounting.

Board of Accountancy (BOA)

A body under the PRC that sets professional standards and ethics for accountants under RA 3105.

Philippine Institute of Certified Public Accountants (PICPA)

The integrated national professional organization representing Filipino accountants.