Fundamentals of Accountancy, Business and Management 1 Flashcards

Comprehensive question-and-answer flashcards covering definitions, history, branches, users, forms, types, principles, and standards in introductory accounting.

What is accounting defined as from a process perspective?

It is the process of identifying, recording, and communicating economic events of an organization to users.

How does bookkeeping differ from accounting?

Bookkeeping focuses specifically on recording transactions, whereas accounting includes recording, analysis, interpretation, and communication.

What are the three basic steps in the accounting process?

Identifying relevant economic events, recording them chronologically, and communicating the results to users through reports.

Why is Luca Pacioli referred to as the Father of Accounting?

He helped disseminate double-entry bookkeeping in the 14th century.

What accounting activity occurred during the Cradle of Civilization around 3600 B.C.?

Clay tablets were used to record financial transactions in early civilizations.

What was the main accounting focus during the Industrial Revolution (1760–1830)?

There was an increased focus on cost accounting, fixed assets, and mass production.

Which branch of accounting records and reports financial information for external users using general-purpose financial statements?

Financial accounting.

What is the primary objective of management accounting?

To provide internal reports that help managers plan, control operations, and make business decisions.

What is auditing?

The independent examination of records and reports to provide assurance about their fairness or compliance.

Which branch of accounting measures, analyzes, and controls the costs of products, services, or processes?

Cost accounting.

Who are internal users of accounting information?

Individuals inside the organization who plan, organize, and operate the business, such as owners, managers, and employees.

Who are external users of accounting information?

Individuals or groups outside the organization who use reports to make decisions, such as creditors, investors, tax authorities, customers, suppliers, and regulators.

What is a sole proprietorship, and what is its primary disadvantage regarding liability?

It is a business owned and usually managed by one person, and its primary disadvantage is unlimited personal liability for the owner.

How is ownership represented in a corporation?

Ownership is represented by shares of stock.

What defines a cooperative business organization?

An organization owned and controlled by members who use its services and share in its benefits.

What is a merchandising business?

A business that buys finished goods from suppliers and resells them to customers.

What is the operating cycle of a manufacturing business?

Buy raw materials, produce finished goods, and sell the finished goods.

What is the Business Entity Concept?

The principle that a business is treated as separate from its owner or owners.

What does the Accrual Accounting Principle require?

Revenue is recorded when earned, and expenses are recorded when incurred, regardless of cash collection or payment.

What is the Going Concern Assumption?

The assumption that a business will continue operating indefinitely unless evidence shows otherwise.

What does the Historical Cost Principle dictate?

Assets are initially recorded at the cash amount or equivalent paid to acquire them.

What is the Matching Principle?

The requirement that expenses must be recorded in the same period as the revenues they helped generate.

What does the Materiality Principle allow in practical accounting?

Small or low-cost items that do not influence decisions (such as tiny office supplies or cheap pens) may be recorded directly as expenses.

What does the Prudence or Conservatism Principle instruct accountants to do when uncertain?

Avoid overstating assets or income and avoid understating liabilities or expenses.

What framework are Philippine Financial Reporting Standards (PFRS) based on?

Internationally accepted financial reporting principles (IFRS).

What are the two fundamental qualitative characteristics of useful financial information?

Relevance and faithful representation.

What are the five elements of financial statements defined in the Conceptual Framework?

Asset, liability, equity, income, and expenses.