CHAPTER 1

Accounting Standards Council

Accounting is a service activity, provides quantitative information to be useful in making an economic decision.

Committee on Accounting Technology (AICPA)

Accounting is an art of recording, classifying, summarizing, and interpreting financial data.

American Accounting Association

Accounting is the process of identifying, measuring, and communicating economic information to the users of information.

Important Points of Accounting Definition

Accounting

1. has quantitative information

2. financial in nature

3. useful in decision making.

Identifying

Analytical Component of Accounting; recognition or nonrecognition of business activities as accountable events.

Measuring

Technical Component of Accounting; assigning of peso amounts to the accountable economic transactions and events.

Communicating

Formal Component of Accounting; the process of preparing and distributing accounting reports to potential users of accounting information.

Transactions

Economic activities of an entity (Internal or External)

External Transactions

“exchange transactions“, economic events involving one and another entity.

Internal Transactions

Economic activities that take place within one entity only.

Production

Process wherein resources are transformed into products

Casualty

Sudden unanticipated loss from natural calamities.

Histrorical Cost

original acquisition cost and most common measure of finnancial transaction.

Recording

“journalizing“, is the process of systematically maintaining a record of all economic business transactions after identifying and measuring.

Classifying

sorting or grouping of similar and interrelated economic transactions; accomplished by posting to ledger.

Summarizing

preparation of financial statements which include SFP, IS, etc.

Ledger

group of accounts systematically categorized into asset, liability, equity, revenue, and expense accounts.

Auditing

primary service offered by most public accountants, examination of FS for expressing an opinion as to fairness.

Taxation

preparation of annual income tax returns, determination of tax consequence.

Management Advisory Service

Used in budgeting, forecasting, quality control, etc.

Accounting, Auditing

Constructive, Analytical

Bookkeeping

procedural concern with development and maintenance of accounting records. (how)

Accounting

conceptual, concerned with the “why“ or reason for any action adopted.

Financial Accounting

primarily concerned with the recording of business transactions and preparation of financial statements. Intended for internal and external (mostly external) users such as investors and creditors.

Financial and Sustainability Reporting Standards Council (FSRSC)

accounting standard setting body that replaced ASC

PAS or PFRS

approved statements of (FSRSC)

International Accounting Standards Council

independent private sector body with the objective of achieving uniformity in the accounting principles around the world.

IASB

Replaced IASC