Fundamentals of Accountancy, Business, and Management 1 - ABM Vocabulary Flashcards

A curated set of vocabulary flashcards covering key terms and definitions from the Fundamentals of Accountancy, Business, and Management 1 (ABM). Cards encompass fundamental accounting concepts, forms of business organizations, accounts and ledgers, the accounting cycle, and essential principles used in the course.

Accounting

The process of identifying, recording, and communicating economic events of an organization to interested users. (e.g., Recording a sale of goods and the cash received.)

Financial Accounting

Branch focused on external users; reports financial information in standard statements (balance sheet, income statement, cash flows). (e.g., Preparing a company's annual income statement for shareholders.)

Management Accounting

Internal-focused accounting; provides budgeting, forecasting, cost analysis, and decision-support information for managers. (e.g., Analyzing the cost of producing a new product line to set pricing.)

Government Accounting

Recording, analysis, and reporting of financial information for government entities and activities. (e.g., Tracking a city's budget for public works projects.)

Auditing

Independent examination of financial statements to express an opinion on fairness of presentation and compliance with GAAP. (e.g., An independent firm reviewing Apple's financial statements to ensure accuracy for investors.)

Cost Accounting

Analysis of manufacturing costs to assist management in cost control and pricing decisions. (e.g., Calculating the labor and material costs for manufacturing a car.)

Accounting Education

Branch dealing with developing future accountants through curriculum and teaching. (e.g., A university professor teaching a course on financial statement analysis.)

Accounting Research

Study focused on improving accounting knowledge and informing standard-setting bodies. (e.g., Studying the impact of new lease accounting standards on companies' balance sheets.)

Sole Proprietorship

A business owned by one person; not a separate legal entity; unlimited liability; simple to form. (e.g., A freelance graphic designer working from home and owning their business entirely.)

Partnership

A business owned by two or more persons; profits shared; liability shared; governed by articles of partnership. (e.g., Two lawyers opening a law firm together and sharing profits.)

Corporation

A separate legal entity created by law; ownership via shares; limited liability; regulated by SEC; stock certificates prove ownership. (e.g., Google (Alphabet Inc.) where millions of people own shares.)

Cooperative

A duly registered association of persons with a common interest; profits distributed to members; regulated by CDA. (e.g., A local credit union where members are also owners and share in profits.)

External Users

People outside the organization who use financial information (e.g., investors, creditors, regulators). (e.g., A bank deciding whether to lend money to a business based on its financial statements.)

Internal Users

People inside the organization who use accounting information (e.g., managers, employees). (e.g., A marketing manager using sales data to plan a new advertising campaign.)

Assets

Resources owned by a business expected to provide future benefits. (e.g., A company's delivery truck or the cash in its bank account.)

Liabilities

Debts or obligations payable to outsiders; what a business owes. (e.g., Money owed to a supplier for office supplies purchased on credit or a bank loan.)

Owner’s Equity

Residual interest of the owner in assets after liabilities; includes capital and withdrawals. (e.g., The initial investment made by the business owner plus any retained earnings.)

Income

Increase in equity from ordinary business activities; includes revenue and gains. (e.g., Revenue from selling pizza at a restaurant or interest earned on a savings account.)

Expense

Decrease in equity from operating activities; includes costs such as salaries, rent, utilities. (e.g., Paying monthly rent for a store or employee salaries.)

Five Major Accounts

Assets, Liabilities, Owner’s Equity, Income, and Expenses. (e.g., When you buy materials (Asset), owe money for them (Liability), and sell products to increase your capital (Equity) and generate sales (Income) while incurring costs (Expenses).)

Current Assets

Assets expected to be realized or consumed within one year (e.g., cash, AR, inventory). (e.g., Cash in a company's checking account or inventory ready to be sold.)

Non-current Assets

Assets not expected to be realized within one year (e.g., PP&E, long-term investments, intangible assets). (e.g., A manufacturing plant or a long-term investment in another company.)

Tangible Assets

Physical assets such as cash, inventory, equipment. (e.g., The building where a business operates or its office computers.)

Intangible Assets

Non-physical assets such as patents, copyrights, trademarks. (e.g., The patent for a new invention or the brand name of Coca-Cola.)

Current Liabilities

Liabilities due within one year (e.g., accounts payable, utilities payable). (e.g., The monthly utility bill due within 30 days or accounts payable to suppliers.)

Non-current Liabilities

Liabilities due beyond one year (notes payable, mortgage). (e.g., A 10-year bank loan for a building purchase.)

Depreciation

Systematic allocation of the cost of a tangible asset over its useful life. (e.g., Recording how the value of a company's delivery van decreases each year due to use.)

Accumulated Depreciation

Contra-asset account representing total depreciation charged against an asset. (e.g., The total amount of value lost by a machine over several years of use, recorded on the balance sheet.)

Deferred Expenses (Prepaid Expenses)

Assets recorded for expenses to be recognized in future periods. (e.g., Paying a year's rent in advance; it becomes an asset until each month passes.)

Deferred Income (Unearned Income)

Liability representing revenue to be earned in future periods. (e.g., A gym receiving a payment for a 6-month membership upfront; it's a liability until the services are provided.)

Accrued Expenses

Expenses incurred but not yet paid. (e.g., Employees have worked for the last two weeks of the month, but haven't been paid yet; the company owes them.)

Accrued Income

Income earned but not yet received. (e.g., A consulting firm completed a project, but hasn't received payment from the client yet.)

Revenue Recognition Principle

Revenue is recognized when earned, regardless of cash collection. (e.g., A software company recognizes revenue when the software is delivered to the customer, not when the payment is received three months later.)

Matching Principle

Expenses are recorded in the same period as the revenues they help generate. (e.g., A company sells products in December; the cost of those products (COGS) is recognized in December, not when the inventory was purchased earlier in the year.)

Going Concern

Assumes the business will continue to operate for the foreseeable future. (e.g., Assuming a restaurant will continue operating next year when valuing its assets and liabilities.)

Monetary Unit Principle

Financial information is measured in a stable monetary unit (e.g., pesos). (e.g., Recording financial transactions in US Dollars ($$), rather than in units of product sold or hours worked.)

Cost Principle

Assets are recorded at their historical cost. (e.g., A company bought land for 100,000 years ago; it is still recorded at 100,000 on the books, even if its market value is now 500,000.)

Disclosure Principle

All relevant and material information should be disclosed in the financial statements. (e.g., A company must disclose details about a major lawsuit it's involved in, even if the outcome is uncertain.)

Conservatism (Prudence) Principle

When in doubt, assets/income are not overstated; liabilities/expenses are not understated. (e.g., If there's a possibility of a loss from a lawsuit, a company should record it immediately; if there's a potential gain, it should wait until it's certain.)

Materiality Principle

Info is material if its omission or misstatement could influence decisions; immaterial items may be expensed. (e.g., A 50 error in a 1 million revenue figure might be ignored, but a 50 error in a 100} petty cash balance would be material.)

Time Period Principle

Accounting events are reported for specific periods (monthly, quarterly, yearly). (e.g., Preparing financial statements for the fiscal year ending December 31st.)

Objectivity Principle

Financial information is supported by independent, verifiable evidence. (e.g., Recording equipment at the price shown on the purchase invoice, not at an estimated value.)

Accounting Equation

Assets = Liabilities + Owner’s Equity; shows that assets are funded by liabilities or owner’s equity. (e.g., If a business has 100,000 in assets and 30,000 in liabilities, its owner's equity must be 70,000.)

Chart of Accounts (COA)

Structured listing of all accounts used by a company with codes for organization. (e.g., A specific code 101 for 'Cash' and 401 for 'Sales Revenue'.)

Journal

Book of original entry; records transactions chronologically with debits and credits. (e.g., Recording a daily sale of goods: debit Cash, credit Sales Revenue.)

General Journal

Journal for non-routine or miscellaneous entries; records all aspects of a transaction. (e.g., Recording the purchase of a new building that involves both cash and a mortgage.)

Special Journals

Journals specialized for recurring transactions (Cash Receipts, Cash Disbursements, Sales on Account, Purchases on Account). (e.g., A retail store using a 'Sales Journal' to record all credit sales of the day.)

General Ledger

Book of final entry; summarizes balances of all accounts used to prepare financial statements. (e.g., The 'Cash' account showing all debits and credits from various transactions, summarizing its final balance.)

Subsidiary Ledger

Detailed ledgers for individual accounts (e.g., individual creditors); totals equal the corresponding general ledger balance. (e.g., A separate record for each customer, detailing what each specific customer (e.g., 'Customer A') owes, while the 'Accounts Receivable' in the General Ledger shows the total amount owed by all customers.)

Trial Balance

List of all ledger accounts with their balances to verify that total debits equal total credits. (e.g., After posting all transactions, ensuring that the total of all debit balances equals the total of all credit balances before preparing financial statements.)

Balance Sheet (Statement of Financial Position)

Statement showing assets, liabilities, and equity at a specific date. (e.g., A snapshot of a company's financial health on December 31, 2023, showing its assets, liabilities, and equity.)

Income Statement (Statement of Comprehensive Income)

Statement showing a period’s revenues and expenses to determine net income or loss. (e.g., A report showing a company's sales, costs, and profit for the entire year 2023.)

Accounting Cycle

Sequence of steps: transactions, journalizing, posting, trial balance, adjusting entries, financial statements, closing. (e.g., From recording daily sales to finally closing the books at year-end and preparing summary reports.)

Cost of Goods Sold (COGS)

Cost of inventory that was sold during the period; calculated differently under periodic vs. perpetual systems. (e.g., If a bookstore buys a book for 10 and sells it for 25, the 10 is the COGS when the book is sold.)

Periodic Inventory System

COGS determined at period end; purchases tracked separately; ending inventory counted. (e.g., A small convenience store counting its remaining inventory at year-end to figure out how much was sold.)

Perpetual Inventory System

Inventory and COGS updated continuously with each sale or purchase. (e.g., A large online retailer automatically updating its inventory records and COGS every time an item is bought or sold.)

Net Income

Revenues minus expenses; increases owner’s equity. (e.g., A company earning 500,000 from sales and having 300,000 in expenses results in a 200,000 Net Income.)

Net Loss

Expenses exceed revenues; decreases owner’s equity. (e.g., A new start-up with 10,000 in revenue but 25,000 in start-up expenses ends up with a 15,000 Net Loss for the month.)

Revenue

Income earned from providing goods or services; increases equity. (e.g., A consulting firm charging a client 10,000 for services rendered.)

Sales

Revenue from selling goods; often distinguished from service revenue in merchandising. (e.g., A clothing store selling a dress for 100.)

Gross Profit

Net sales minus cost of goods sold. (e.g., A store sells a shirt for 50 that cost them 20, so the gross profit is 30.)

Operating Cycle

Cycle from cash to cash, encompassing inventory purchase, sale, collection, and reinvestment. (e.g., A cycle where a clothing store buys fabric, manufactures clothes, sells them, collects cash from customers, and uses that cash to buy more fabric.)

Accounts Receivable

Amounts owed by customers from credit sales. (e.g., A customer buys goods on credit from your store; the money they owe you is Accounts Receivable.)

Accounts Payable

Amounts owed to suppliers from credit purchases. (e.g., Your business buys office supplies on credit; the money you owe the supplier is Accounts Payable.)

Notes Payable

Formal debt evidenced by a promissory note. (e.g., A company signing a formal document to borrow 50,000 from a bank, promising to repay it in 3 years.)

Stock Certificate

Document proving ownership of shares in a corporation. (e.g., A piece of paper (or electronic record) confirming that you own 100 shares of Microsoft stock.)

SEC

Securities and Exchange Commission; regulator of corporations in the Philippines. (e.g., The SEC reviewing the financial reports of publicly traded companies in the Philippines to protect investors.)

BIR

Bureau of Internal Revenue; government tax authority. (e.g., A company filing its annual income tax return with the BIR.)

Saysay-Husay-Sarili (SHS) Framework

SHS for SHS framework core values: SaySay (Meaning), Husay (Mastery), Sarili (Ownership) guiding instruction. (e.g., In a marketing project, students understand the 'SaySay' (meaning) of their product, apply 'Husay' (mastery) in creating a compelling presentation, and take 'Sarili' (ownership) of their roles.)