ENTRANCE EXAM

ACCOUNTANCY ENTRANCE EXAM

Father of Modern Accounting in Venice 1494

Luca Bartolomeo de Pacioli is known as the Father of Modern Accounting in Venice in 1494.

Main Branches of Accounting

Public accounting, private accounting, government accounting are the main branches of accounting.

Owners

Internal users of financial reports interested in determining the return of investment in the business.

Creditors

External users interested in financial reports.

Essential Traits of Accounting

Qualitative information, financial in nature, useful in decision-making.

Objectives of Accounting

Ascertain results of operations, ascertain financial position, maintain control over assets, aid management in planning and performance evaluation, provide information to government agencies and for legal purposes.

Financial Accounting

Concerned with general-purpose financial statements and business financial position.

Management Accounting

Prepares financial and accounting information for management's planning, assessing, and motivating functions.

Government Accounting

Focuses on proper custody of government funds and their purposes.

Auditing

Review of a firm's accounting systems and financial statements to ensure compliance with GAAP and prescribed standards.

Tax Accounting

Involves tax computation, filing tax returns, and planning for future tax obligations.

Cost Accounting

Involves collecting, recording, and classifying costs incurred by a firm.

Accounting Education

Preparation for a professional career in accountancy.

Accounting Research

Responsible for developing and discovering accounting concepts and practices.

Tax Avoidance

Lawful attempt to reduce tax payments.

Tax Evasion

Illegal non-declaration of income sources on which tax is due.

Uniform Accounting Standards

Needed for fair presentation of financial statements and reliable information for comparison.

Entity Regulating Standards

IASB (International Accounting Standards Board) regulates accounting standards.

Generally Accepted Accounting Principles (GAAP)

Guidelines laid out by the IASB.

Accounting Firms in the PH

FRSC, PFRS, PRS are the accounting firms in the Philippines.

Double Entry

Basic accounting theory based on dual effects of transactions.

Steps of Accounting Process

Analyzing, recording, classifying, summarizing, reporting, interpreting.

Accounting

Gathering financial information and reporting to users.

Analyzing

Examining events and their impact on the business.

Recording

Entering financial information into the accounting system.

Classifying

Sorting and grouping similar items.

Summarizing

Aggregating similar events to provide simplified information.

Reporting

Communicating the results.

Interpreting

Deciding the meaning and importance of reports.

Generally Accepted Accounting Principles

Rules by the Securities and Exchange Commission.

Service Business

Provides services.

Merchandising Business

Buys products to sell to customers.

Manufacturing Business

Makes products to sell.

Accounting Clerk

Performs daily accounting tasks in businesses.

Bookkeepers

Supervise accounting clerks and handle tax requirements.

Para-Accountants

Provide accounting, auditing, or tax services under an accountant's supervision.

Accountants

Design accounting info systems and analyze information.

Certified Public Accountant

Achieves professional recognition as a public accountant.

Forensic Accounting

Includes fraud detection, prevention, and business valuations.

Accounting Information Systems

Design and implement manual and computerized accounting systems.

Budgeting

Helps managers develop financial plans.

Certified Fraud Examiner

Forensic accountant who passed the exam.

Certified Internal Auditor

Achieved professional recognition as an internal auditor.

Certified Management Accountant

Passed an exam offered by the Institute of Management Accountants.

Controller

Oversees the accounting process in a company.

Management Advisory Services

Provides advice on managerial issues.

Assets and Expenses

Accounts debited when increased.

Liabilities and Capital

Accounts credited when increased.

Account

Record summarizing changes in assets, liabilities, and owner's equity.

Account Title

Description of asset, liability, equity, revenue, or expense.

Accounting Equation

Assets = Liabilities + Owner's Equity.

Accounting Period Concept

Income determination on a periodic basis.

Accounts Payable

Promise to pay a supplier for assets or services.

Accounts Receivable

Amount owed by customers for goods or services.

Asset

Owned item providing future benefits.

Balance Sheet

Reports assets, liabilities, and owner's equity on a specific date.

Business Entity

Engages in economic activities and controls resources.

Business Transaction

Economic event impacting the business.

Capital

Amount by which assets exceed liabilities.

Drawing

Owner's withdrawals reducing equity.

Expenses

Decrease assets, increase liabilities in revenue production.

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Current Liabilities

Liabilities due within 1 year or the normal operating cycle of a business

Income Summary

Temporary account used in the closing process to summarize revenue and expense accounts

Operating Cycle

Time needed to purchase supplies, convert them to cash

Permanent Accounts

Accumulate info across accounting periods, on the balance sheet

Post-Closing Trial Balance

Prepared after closing entries to ensure debit/credit balance equality

Corporation

Artificial entity separate from owner, created by law

AICPA

American Institute of Certified Public Accountants

AAA

American Accounting Association

Stable Monetary Unit

Financial statements in a common financial denominator

Historical Cost

Assets valued based on original cost

Right of Succession

Corporation continues despite shareholder death

Commission on Audit

Regulates government accounting

Money-Measuring Unit

Money as the best unit for assets, liabilities, equity

Revenue Recognition

Recognizing revenue at the point of sale

Predictive Value and Confirmatory Value

Ingredients of relevance

Confirmatory Value

Provides feedback on previous evaluations

Faithful Representation

Information reasonably free of error and bias

General Partner

Partner with unlimited liability

Department of Budget and Management

Formulates and implements national budget