Conceptual framework and accounting standards

Equity

Residual interest in the assets of an entity that remains after deducting its liabilities. In a business enterprise, the equity is the ownership interest.

Philippine Interpretation Committee

formed by FRSC to prepare interpretations of PFRS for approval by FRSC and to provide timely guidance on financial reporting issues not specifically address in current PFRS.

Statement of Comprehensive Income

its purpose is to provide a more comprehensive information about financial performance measured more broadly than the income as traditionally computed.

Income

money received, especially on a regular basis, for work or through investments.

Control

present ability to direct the use of economic resource to obtain the economic benefits that mat flow from it

Liability

present obligation of an entity to transfer an economic resources as a result of past event

Accounting as a science

process of identifying, measuring and communicating economic information to permit informed judgement and decision by users of information.

Recogniton

process of including in the statement of financial position or statement of financial performance an item that meets the definition of one of the elements of financial statements

Retained components

refers to the real accounts continued to be retained in the company which is separated already from the transferred components

Measuring

Technical component which involves assigning currency amounts to the accountable economic transactions or events.

Carrying amount

The amount at which an asset or liability is valued according to accounting principles.

Fair value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Classifying

The process of grouping together items that are alike in some way and interrelated economic transaction or events.

Consolidated financial statements

combination of the separate financial statements of the parent (purchasing company) and the subsidiary (acquired company) into a single set of financial statements

Public Practice

compose of individual practitioner, small accounting firm and large multinational organizations rendering independent and expert financial services to the public.

Other Comprehensive Income (OCI)

comprised of revenues, expenses, gains, and losses that are explicitly excluded from net income in specific accounting standards.

Combined Financial Statements

Financial statements that include a group of related companies without including the parent company or other owner.

Communicating

Formal components which involves preparing and distributing accounting reports to potential users of accounting information.

Accounting

Its function is provide quantitative financial information about a economic entity that is useful for the users in making economic decision.

Private practice

Main objective is to assist management in planning and controlling the entity's operation.

Value in use

Present value of cash flows that an entity expects to derive from use of an asset and from its ultimate disposal

Fulfillment value

Present value of cash that an entity expects to be obliged to transfer as it fulfills a liability

Comparative information

Presentation of the financial statements of an entity for multiple years.

Current value measures

Provide monetary information about elements of financial statements using information updated to reflect condition at measurement date.

Historical Cost measures

Provide monetary information about elements of financial statements using the information derive from the price of a transaction and other events that gave rise to them.

Notes to the financial statements

Provide narrative description or disaggregation of the items presented in the financial statements and information about items that do not qualify for recognition

Executory contract

a contract or a portion of a contract that is equally unperformed which establishes a combined right and obligation to exchange economic resources

Expense

a decrease in owner's equity resulting from the operation of a business

Obligation

a duty of responsibility that an entity has no practical ability to avoid

Asset

a present economic resource controlled by the entity as a result of past events.

Economic Resources

a right that has the potential to produce economic benefits.

GAAP (Generally Accepted Accounting Principles)

a set of accounting standards that is used in the preparation of financial statements

Financial Reporting Standard Council

an accounting standard setting body created by PRC upon recommendation of the BOA to assist BOA in carrying out its power and functions provided under RA 9298.

Unit of account

an item or grout of items to which recognition criteria and measurement concepts are applied

Measurement inconsistency

applying different measurement bases for the same set of transaction.

Periodicity Concept

businesses can and should report economic information on a regular periodic basis

Cash flow from operating activities

cash flows directly related to sale and production of the firm's products and services

Cash flow from financing activities

cash flows that result from debt and equity financing transactions; include incurrence and repayment of debt, cash inflow from the sale of stock, and cash outflows to repurchase stock or pay cash dividends.

Line Items

categories of similar accounts which are material and specifically prescribe by the standards to be presented on the face of financial statements.

Frequency of reporting

companies can report internally as frequently as they choose, usually monthly, for external purposes the SEC companies must prepare a set of financial statements quarterly and on an annual basis

Government accounting

encompasses the processes of analyzing, recording, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property and interpreting the results thereof

Unconsolidated financial statements

financial statements which includes the information only coming from the parent alone

Accounting in education

focuses on teaching accounting, taxation, business law, finance, business management and other related fields in any higher education institution

Cash flow from investing activities

involves any cash in or out of the company due to investment in or disposal of fixed assets.

Presentation

is the process of including in the face of the set of financial statements an items that meets the definition of any elements of financial statements and is deemed useful

Offsetting

presenting real accounts at net amounts

Financial performance

primarily measured in terms of level of income earned by the entity through the effective and efficient utilization of its resources.

Accounting as an art

process of recording, classifying and summarizing business transaction in a significant manner and in terms of money.

Derecognition

process of removing something from the balance sheet or income statement

Recording

process of systematically maintaining a records of all economic business transaction after they have been identified and measured.

Disclosure

refers to the process of including additional pertinent information in the financial statements and accompanying notes

Transferred component

refers to the real accounts which are expired, consumed, collected, fulfilled or transferred and recognized any resulting income and expense

Measurement uncertainty

rick of assigning peso amounts which might not actually purport the essence of the transaction.

Matching of costs with income

simultaneous recognition of income and related expense

Accrual Basis Accounting

the method of accounting that recognizes revenue when it is earned and matches expenses to the revenues they helped produce

Primary purpose of Financial Statements

to provide the information about the financial position, financial performance and cash flows that is useful to provide to a wide range of users in making economic decision

Secondary purpose of Financial Statements

to show the results of managements stewardship over the entity's resources

Aggregation

adding together of elements of financial statements that have shared characteristics and are included in the same classification

Current assets

1. cash or cash equivalent 2. hold the asset primarily for the purpose of trading 3. realizable within 12 months after the reporting period. 4. realizable or has an intention to sell or consume within normal operating cycle

Current Liabilities

1. the entity expect to settle the liability within normal operation cycle. 2. the entity holds the liability primarily for the purpose of trading 3. the liability is due to be settle within 12 months after the reporting period 4. the entity does not have an unconditional right to defer the settlement of the liability for at 12 months after the reporting period

Consistency Principle

A business should use the same accounting methods and procedures from period to period.

Fair Presentation Framework

A financial reporting framework that requires compliance with the requirements of the framework, acknowledges explicitly or implicitly that it may be necessary for management to provide disclosures beyond those specifically required by the framework in order to achieve fair presentation of the financial statements, and acknowledges explicitly that it may be necessary for management, in extremely rare circumstances, to depart from a requirement of the framework to achieve fair presentation of the financial statements.

Statement of changes in equity

A financial statement that summarizes the changes in total shareholders' equity, as well as each component of shareholders' equity, for a specific period of time.

Direct Method

A method of determining net cash provided by operating activities by adjusting each item in the income statement from the accrual basis to the cash basis. The direct method shows operating cash receipts and payments.

Indirect method

A method of preparing a statement of cash flows in which net income is adjusted for items that do not affect cash, to determine net cash provided by operating activities.

Measurement

A process of quantifying elements recognized in financial statements in monetary terms

Identifying

Analytical component which involves recognition or non recognition of business activities as accountable events.

Board of Accountancy

Body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.

Going Concern Assumption

The assumption that the company will continue in operation for the foreseeable future.

Comprehensive Income

The change in equity from nonowner transactions

Reporting Entity

The entity assumption assumes that a proprietorship, partnership, or corporation's financial activities are distinguished from other financial organizations in keeping its own financial records and reports.

Republic Act 9298

This is the law regulating the practice of accountancy in the Philippines.

Summarizing

This is the preparation of financial statements.

Materiality Concept

a company must perform strictly proper accounting only for items that are significant to the business's financial situation