Financial Accounting & Reporting 101

the information is likely to be FINANCIAL IN NATURE

Defining accounting Important points - 2

should be USEFUL IN DECISION MAKING

Defining accounting Important points - 3

Accountant's Primary Task

"To supply financial information so that the statement users could make informed judgement and better decision."

Installment method and cost recovery method or sunk cost method

2 methods that revenue is recognized at the point of collection.

Minimum of Three years (meaningful experience in any of the areas of public practice including taxation)

A certificate of accreditation shall be issued to certified public accountants in public practice only upon showing in accordance with rules and regulations promulgated by the board of accountancy and approved by the PRC that such registrant has acquired a

Accounting Postulate

A fundamental assumption in the field of accounting. Like any field, the present system of accounting has certain underlying axioms which form the basis of the all framework.

Forming an opinion

A purpose of Conceptual Framework assisting auditors in _____________ as to whether financial statements conform with Philippine GAAP.

Assist the FRSC (Financial Reporting Standards Council)

A purpose of Conceptual Framework in the review and adoption of International Financial Reporting Standards

Identifying, measuring, communicating economic information

A.A.A. - Accounting is the process

in making an economic decision

AAA - the very purpose of accounting is to provide quantitative information to be useful

A) ABC LTD has been sued by XYZ LTD for $10 million as damages for breach of contract. The decision of the Court is still pending.

ABC LTD has a yearly turnover of $100 million. Which of the following information is material to the users of its financial statements? A) ABC LTD has been sued by XYZ LTD for $10 million as damages for breach of contract. The decision of the Court is still pending. B) ABC LTD sold goods worth $1 million to its subsidiary DEF LTD. C) ABC LTD does not disclose details of its operating lease in respect of an office space rented at $10,000 per annum.

Private Accounting (controller - highest accounting officer)

Accounting Staff, Chief Accountant, Internal auditor and Controller are under what general practice of accounting?

Other assets

Advances to employees is under what line item in the balance sheet when it is more than the period

Identifying (1 of 3 components)

Analytical component of accounting is

Net assets (fund balance)

Assets less liabilities are

In a BROAD SENSE accounting embraces

Auditing is one of the areas of accounting specialization, it is analytical in a sense

Cost of goods sold (manufacturing= Beginning inventory + Cost of goods manufactured - Ending inventory = Cost of goods sold)

Beginning inventory + Net Purchases + Freight in = gas - Ending inventory =

Public Accounting, Private Accounting and Government Accounting

C.P.A.s generally practice their profession in three main areas these are

investments in the noncurrent asset line

Cash Fund that is set aside for noncurrent purposes is classified as

To provide information useful in MAKING DECISIONS about providing resources of the entity. To provide information useful in ASSESSING the prospects of future net cash flows to the entity. To provide information of entity's resources, claims and changes in resources and claims.

Conceptual Framework for Financial Reporting states the following OBJECTIVES of financial reporting:

International Financial Reporting Standards (IFRS) - is a GLOBAL PHENOMENON intended to bring about greater transparency and a higher degree of comparability in financial reporting

Considered to be more principle-based while GAAP is considered to be more rules based. Income is a financial statement element according to the IFRS.

Government Accounting

Custody and administration of funds are the focus of what general practice of Accounting?

is about QUANTITATIVE information

Defining accounting Important points - 1

The Operating Cycle

Entity's resources are ASSETS and arises form

60 credit units (CPA 65 yrs old is exempted from the CPD requirements only for renewal not for the general practice of Public Accounting / temporary exemption 2 years if CPA is in Abroad))

Every three years how many CPD credit units should be earned

predictive value and confirmatory value

Financial information is capable of making a difference in a decision if it has:

The Conceptual Framework (a summary of terms and concepts that underlie the preparation and presentation of financial statements for external users.)

For Financial Reporting this is a complete, comprehensive and single document promulgated by the International Accounting Standards Board

Communicating (1 of 3 components)

Formal component of accounting is

limited ( accounting ceases when financial statements are prepared)

In a __________ sense accounting is essentially constructive in nature and conceptual.

Cost is equivalent to the cash payment

In a cash transaction, what is cost?

Board of Accountancy (Responsible preparing and grading the Philippine CPA examination)

Government examination is given by the

The Philippine Financial Reporting Standards (PFRS)/Philippine Accounting Standards (PAS) are the new set of Generally Accepted Accounting Principles (GAAP) issued by the Accounting Standards Council (ASC) to govern the preparation of financial statements.

IFRS (International Financial Reporting Standards ) is a set of accounting standards developed by an independent, not-for profit organization IASB 2001 onwards, its Philippine version is

A. Profit or loss for the period (net income/loss) B. Prior period errors (understated/overstated) C. Dividends DECLARED and PAID to shareholders D. Change in accounting policy (debit-less/credit+add) E. Appropriation of retained earnings (less-r.e./add-r)

IMPORTANT DATA shown in the statement of retained earnings

Recording, Classifying and Summarizing aspects of accounting

Implicit in the communication process are the

Cost is equal to the fair value of the asset given or fair value of the asset received, whichever is clearly evident (in the absence of fair value, the cost is equal to the carrying amount of the asset given.)

In a noncash transaction, what is cost?

not understated

In the measurement process Liabilities or expenses are

not overstated

In the measurement process assets or income are

A. Separately for each component of equity

In the statement of changes in equity the effects of the correction of a prior period error are presented: A. separately for each component of equity. B. in aggregate for total equity. C. in aggregate for total equity and separately for the total amounts attributable to owners of the parent and the non-controlling interests.

A. separately for each component of equity only.

In the statement of changes in equity the effects of the retrospective application of a change in accounting policy is presented: A. separately for each component of equity only. B. in aggregate for total equity only. C. in aggregate for total equity and separately for the total amounts attributable to owners of the parent and to non-controlling interests.

not necessarily valid (accounting function is to account for nominal pesos only not for changes in purchasing power)

In today's world the assumption that the peso is a stable measure over time is

Statement of changes in equity

In what statement does the conceptual framework identifies no elements that are unique

Notes to financial Statements

Includes explanations of various activities, additional detail on some accounts, and other items as mandated by the applicable accounting framework, such as IASB

Complete Neutral Free from Error

Ingredients to a faithful representation a depiction should have three characteristics

cost principle

Inherent in the asset recognition is the

Managerial accounting (its focus on providing information within the company so that its management can operate the company more effectively.)

Is a branch of accounting that computes a manufacturer's product costs that are needed for the external financial statements for better economic decision making.

Accounting as an information system

Is an information system that measures business activities, processes information into reports and communicates the reports to decision makers

Equity

Is the "residual interest in the assets of the entity after deducting all of the liabilities."

Recording or Journalizing

Is the process of systematically maintaining a record of all economic business transactions after they have been identified and measured.

Classifying (This is accomplished by posting to the ledger)

Is the sorting or grouping of similar and interrelated economic transactions into their respective classes

Overall Objective of accounting

Is to provide quantitative information financial information about a business that is useful to statement users particularly owners and creditors, in making economic decisions

financial information reported (imposes cost)

It is important that such cost is justified by the benefit derived from the

Conservatism - synonymous to prudence (if there is a choice between two acceptable asset values, the lower figure is selected)

It means "in case of doubt, record any loss and do not record any gain."

Bankcruptcy

Liabilities more than asset in an entity results to

Relevance (1of2 fundamental qualitative characteristics)

Material information influences the ECONOMIC DECISIONS of the users and is therefore relevant to their needs.

Relative Size

Materiality of an item depends on _____________ rather than absolute size.

INDIRECT verification (FIFO)

Means checking the inputs to a model, formula or other technique and RECALCULATING the inputs using the same methodology

Comparability (is the goal and implies the principle of CONSISTENCY helps achieve that goal)

Means the ability to bring together for the purpose of noting points of likeness and difference

Technical (1 of 3 components)

Measuring component of accounting is

Reliability

Omission or mistatement of an important piece of information impairs users' ability to make correct decisions taken on the basis of financial statements thereby affecting the reliability of information.

A.I.C.P.A. - Accounting is the art of

Recording, Classifying, Summarizing and Interpreting

Completeness (information must be complete)

Reliability of information contained in the financial statements is achieved only if _______________ financial information is provided relevant to the business and financial decision making needs of the users.

Financial Performance

Results of operations is also known as

Payment of cash Transfer of non-cash assets Provision of services Replacement of the obligation with another obligation Conversion of the obligation into equity

Settlement of of a present obligation may occur in a number of ways:

Statement of cash flows (shows the cash inflows and outflows from three activities: operating, investing, and financing.)

Shows changes in the entity's cash flows during the reporting period.

Balance Sheet

Shows the entity's assets, liabilities, and stockholders' equity as of the report date. It does not show information that covers a span of time.

Income statement (P&L Statement)

Shows the results of the entity's operations and financial activities for the reporting period. It includes revenues, expenses, gains, and losses.

Certified Public Accountants in the Philippines

Single Practitioners and partnerships for the practice of public accountancy shall be registered as

a unit measure

Such events are NOT ACCOUNTABLE because they cannot be quantified or expressed in terms of

theoritical foundation

The Conceptual Framework is an attempt to provide an overall _________________ for accounting which will guide standard-setters, preparers and users of financial information in the preparation and presentation of statements.

GAAP in the Philippines

The Financial Reporting Standards Council (FRSC) of the Philippines is the regulatory body task to establish and improve the

theoretical foundation

The Framework is an attempt to provide an overall _______________ for accounting which will guide standard-setters, preparers and users

consolidated financial statements

The Framework is concerned with general purpose financial statements including

"A measurement basis according to which assets are recorded at acquisition price"

The Framework of International Accounting Standards Board (IASB) defines historical cost as

Republic Act No. 9298 (Philippine Accountancy Act of 2004)

The Law regulating the practice of accountancy in the Philippines

fundamental qualitative characteristics and enhancing qualitative characteristics

The Qualitative Characteristics are classified into:

Universal Language of Business

The communication process is the reason why accounting has been called the

THE CONTINUITY ASSUMPTION

The conceptual framework for financial reporting mentions only one of the four assumptions namely going concern, this postulate is the very foundation of the COST PRINCIPLE, also known as

Financial Statements

The documents that report financial information about an entity to decision makers, it is a key product of this information system is a set of

Income Expense

The elements directly related to the measurement of financial performance in the income statement are:

Asset Liability Equity

The elements directly related to the measurement of financial position are:

Comparability Understandibility Verifiability Timeliness

The enhancing qualitative chracteristics

Historical Cost, Current Cost, Realizable value and Present value

The four measurement bases or financial attributes

Relevance and Faithful representation (Information represented must be useful)

The fundamental qualitative characteristics are

amount, timing, and uncertainty of future cash flows.

The income statement is important because it provides investors and creditors with information that helps them predict three elements

A. Cause and effect association B. Systematic and rational allocation C. Immediate recognition

The matching principle has THREE applications

summarizing

The preparation of the financial statements is the ________________ phase of accounting.

interpreting

The purpose of this Framework is to assist users of ____________ financial statements in the information contained.

IDENTIFYING

This accounting process is the recognition and non-recognition of business activities as "accountable events"

continuity assumption

This postulate is the very foundation of the COST PRINCIPLE. also known as

External and Internal transactions

These activities of an entity that are referred as transactions may be classified as

Internal transactions (production and casualty loss)

These are economic events involving the entity only.

Management advisory services

These have become increasingly important in recent years, although audit and tax services are undoubtedly the mainstay of public accountants.

The Securities and Exchange Commission

They shall not register any corporation organized for the practice of public accountancy

Measuring

This accounting process involves the accountable economic transactions and events as to Assigning of Peso Amounts

Monetary unit

This assumption has two aspects quantifiability and the stability of the peso

Going Concern (Thus assets are recorded at cost. As a rule, market values are ignored)

This assumption means in the absence of evidence to the contrary, entity CONTINUING IN OPERATION INDIFINITELY.

Time period Assumption (Calendar year ends Dec. 31, Natural Business year ends at any month, By convention accounting period is either or)

This assumption requires that the indefinite life of an entity is subdivided into time periods or accounting periods usually equal length purpose on preparing financial reports, performance, and cash flows

Subscription Receivable and Treasury stock

This line item should preferably be reflected as a deduction from related subscribed capital stock. However, if collectible within one year should be classified as a current asset.

quantifiability aspect

This means all value on transactions should be stated in Philippine Peso as unit of measure

stability of the peso

This means that the purchasing power of the peso is stable or constant

A Purpose of Conceptual Framework

To provide information to those interested in the work of the FRSC in the formulation of PFRS is what?

1. It is PROBABLE that future economic benefits will flow to the entity 2. The economic benefits can be measured RELIABLY

Two conditions must be present for the recognition of INCOME:

1. It is PROBABLE economic benefits will flow to the entity 2. The COST or VALUE of the ASSET can be measured RELIABLY

Two conditions must be present for the recognition of an ASSET:

All CPAs shall abide and is MANDATORY on the CPD promulgated by the Board of Accountancy, subject to the approval of the PRC in coordination with PICPA

Under Resolution 59 of the Board of Accountancy, the term Continuing Professional Development is used in lieu of Continuing Professional Education

Primary users and Other users

Under The Conceptual Framework for Financial Reporting the users of financial information may be CLASSIFIED into two:

Accounting entity

Under this assumption, the entity is separate from the people who constitute the entity to have a fair presentation of financial statements.

Immediate recognition

Under this principle, the cost incurred is expensed outright because of uncertainty of future economic benefits or difficulty of reliably associating certain costs with future revenue

Economic Activities (Sociological and Psychological matters are beyond the province of Accounting)

What activity is emphasized and recognized in Accounting? it's subject matter, measurement and obligations

Special purpose financial reports

What are OUTSIDE the scope of the Conceptual Framework prospectuses and computations prepared for taxation purposes

Financial statements (are the end-product reports of accounting.)

What are a collection of reports about an organization's financial results, financial condition, and cash flows.

Intangible assets (If an intangible asset has a finite useful life, you should amortize it over that useful life. The amount to be amortized is its recorded cost, less any residual value in the RECORDED AS ADMINISTRATIVE EXPENSES. )

What are assets having a relatively long life, with no physical existence, whose value lies in rights, privileges and competitive advantages which they give the owner.

Marketable securities

What are debts that are to be sold or redeemed within a year. These are financial instruments that can be easily converted to cash such as government bonds, common stock or certificates of deposit.

Depreciation

What are expenses that may appear in any category, depending on what the assets in question are used for.

line items (cash and cash equivalents, trade and other receivables property, plant and equipment, and trade and other payables)

What are included when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to an understanding of the entity's financial position.

The enhancing qualitative chracteristics

What are intended to increase the usefulness of the financial information that is relevant and faithfully represented.

Finance Cost

What are interest and other charges involved in the borrowing of money to build or purchase assets. The total expenses associated with securing finance for a project or business arrangement.

Current cost, Realizable value and Present Value

What are other measurement bases?

Operating Expenses - General and Administrative Expenses (Rent)

What are overhead, support, and management costs from across the entity.

Financial Statements

What are prepared at least annually and are directed toward the common needs of a wide range of users

Accounting Assumptions (aka postulates, serve as a foundation or bedrock to avoid miscommunication)

What are the BASIC NOTIONS or fundamental premises on which the accounting process is based.

Qualitative Characteristics

What are the QUALITIES or attributes that make financial accounting information USEFUL to the users in the conceptual framework

Substance over form

What is central to the faithful representation and reliability of information contained in the financial statements?

OBJECTIVE of financial reporting. QUALITATIVE characteristics of useful financial information. DEFINITION, Recognition and Measurement of the elements. CONCEPTS of capital and capital maintenance

What are the Scope of Conceptual Framework

Accounting entity, Going Concern, Time period, Monetary unit

What are the four basic assumptions

Asset recognition principle Liability recognition principle Income recognition principle Expense recognition principle

What are the four main recognition principles to be followed in the preparation and presentation of financial statements, as explicitly enumerated in the Conceptual Framework, namely:

1. two statements (income statement(p&l)/statement oci) 2. single statement of comprehensive income (p&l and oci combined)

What are the two options of presenting comprehensive income

External transactions

What are those transactions economic events involving one entity and another entity?

Other comprehensive income (is a catch-all for all of the items that cannot be included in typical profit and loss calculations in the statement of changes of equity are classified in reserves)

What comprises items of income and expenses including reclassification adjustments THAT ARE NOT RECOGNIZED IN PROFIT OR LOSS as required or permitted by PFRS.

Distribution Costs note:freight out as delivery expense and depreciation of equiptment related to sales)

What constitute costs which are directly related to selling, advertising and delivery of goods to customers.

Losses

What does not arise in the course of the ordinary regular activities and include losses resulting from disasters.

Government Accounting

What encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and disposition of GOVERNMENT FUNDS AND PROPERTY and interpreting the results thereof.

Bureau of Internal Revenue

What entity requires audited financial statements to accompany the filing of annual income tax return

Public Accounting (auditing, taxation and management advisory services)

What field is composed of individual practitioners, small accounting firms and large multinational organizations that render independent and expert financial services to the public

Auditing (or external auditing is the "examination of financial statements by independent cpa for the purpose of expressing an opinion as to fairness with which the financial statements are prepared."

What has been the traditionally primary service offered by most public accounting practioners

Taxation Service

What includes the preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors

Expenses

What is "decrease in economic benefit during the accounting period in the form of an outflow or decrease in asset or increase in liability that results in decrease in equity, other than distribution to equity participants."

Neutral Depiction

What is "without bias" in the preparation or presentation of financial statements?

The Conceptual Framework for Financial Reporting (summary of the terms and concepts that underlie the preparation and presentation of financial statements for external users)

What is a complete, comprehensive and single document promulgated by the International Accounting Standards Board.

Deficit

What is a debit balance in retained earnings and should be deducted from stockholders' equity.

Sinking Fund (classified as investment noncurrent asset line)

What is a fund for liquidation of longterm debt such as bonds payable?

The Ledger

What is a group of accounts which are systematically categorized into different accounts.

Cost (out weighs or falls short of the benefit)

What is a pervasive constraint on the information that can be provided by financial reporting.

Materiality (concept is also known as doctrine of convenience)

What is a practical rule in accounting which dictates that strict adherence to GAAP is not required when the items are NOT SIGNIFICANT ENOUGH to affect the evaluation, decision and fairness of the financial statements.

Audit (Whether they are in conformity with general accepted principles)

What is a systematic and independent examination of books, accounts, documents and vouchers of an organisation to ascertain how far the financial statements present a true and fair view of the concern.

Recognition

What is a term which means the reporting of an asset, liability, income or expense on the face of the financial statements of an entity

Endowment funds (are often used by nonprofits, universities, hospitals and churches.)

What is an investment fund set up by an institution in which regular withdrawals from the invested capital are used for ongoing operations or other specified purposes.

comprehensive income (all changes in equity during a period except those resulting from transactions by owners)

What is calculated by adding net income, the sum of recognized revenues minus the sum of recognized expenses, to other comprehensive income

Restricted cash

What is cash not available for immediate use. Such cash cannot be used by a company until a certain point or event in the future as classified in investment

FRSC (Any member of the ASC could be appointed to the FRSC)

What is composed of 14 + 1 with chairman who had been or is a senior accounting practitioner they shall have a term of 3 years renewable for another term.

Liability

What is defined as "a present obligation arising from past events the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits."

Comprehensive Income (is viewed as a measure of a company's earning performance for a specific time period)

What is defined as the CHANGE IN EQUITY (net assets) of a business during a PERIOD from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

The future economic benefits

What is embodied in an asset is the potential to contribute directly or indirectly to the flow of cash and cash equivalents to the entity.

Philippine Interpretations Committee (PIC)

What is formed in August 2006 by the FRSC and has replaced the IC formed by the ASC in May 2000

Bookkeeping

What is procedural and largely concerned with the development and maintenance of accounting records

Audit by an independent CPA

What is required for banks and other lending institutions in order they would be granted a loan

External Auditing

What is the "attest function" of independent CPAs

Is to assist management in planning and controlling the entity's operations

What is the Major objective of the private accountant

Financial Reporting (The principal way of providing financial information to external users is through the annual financial statements.)

What is the PROVISION of financial information about to entity to external users that is useful to them in making economic decisions and for assessing the effectiveness of the entity's management.

Philippine Accounting Standards

What is the Philippine version of International Accounting Standards IAS were issued by the International Accounting Standards Committee (IASC) from 1973 to 2001

Financial Accounting

What is the area of accounting that emphasizes reporting to CREDITORS and INVESTORS?

Cost of Goods Manufactured

What is the beginning raw materials+net purchases-end raw materials=RAW MATERIALS USED. Add direct materials, direct labor, and manufacturing overhead=TOTAL MANUFACTURING COST add beg. w.i.p. less end work-in-process=

Prudence (uncertainties)

What is the desire to exercise care and caution when dealing with UNCERTAINTIES

Historical Cost (than other 3 measurement basis)

What is the most common measure of financial transactions?

Communicating

What is the process of PREPARING AND DISTRIBUTING accounting reports to potential users of accounting information.

Shareholders' Equity

What is the residual interest of owners in the net assets of a corporation measured by the excess of assets over liabilities.

The preparation of Financial Statements

What is the seventh step in the 9-step accounting cycle.

Comprehensive income a. components of profit or loss b. components of other comprehensive income

What is the sum of net income and other items that must bypass the income statement because they have not been realized, including items like an unrealized holding gain or loss from available for sale securities and foreign currency translation gains or losses.

Convertible Debt

What is when a company borrows money from an investor or a group of investors and the intention of both the investors and the company is to convert the debt to equity at some later date.

Standard Adequate Disclosure

What means that all significant and relevant information leading to the preparation financial statements shall be clearly reported

Verifiability (implies CONSENSUS, can be direct or indirect)

What means that different knowledgeable and independent observers reaches an agreement depicts a faithful representation

Timeliness (Generally, the older the information, the less useful but the past predicts the future)

What means that financial information must be available or communicated early enough when a decision is to be made

DIRECT verification (Cash count)

What means verifying an amount or other representation through DIRECT observation

Cash method (All collections are treated as revenue)

What method which revenue is recognized when received regardless of when earned.

The statement of changes in equity

What presents an entity's profit or loss for a reporting period, items of income and expense recognized in other comprehensive income for the period, the effects of changes in accounting policies and corrections of errors recognized in the period, and the amounts of investments by, and dividends and other distributions to, equity investors during the period.

The elements of financial statements ("building blocks" which they are constructed)

What refers to the quantitative information reported in the statement of financial position and income statement?

The matching principle

What requires that "those costs and expenses incurred in earning a revenue shall be reported in the same period."

Understandibility (1of4 enhancing qualitative characteristics)

What requires that financial information must be comprehensive or intelligible if it is to be most useful, clear and concise.

Interest Revenue

What shall be recognized on a time proportion basis that takes into account the effective yield on the asset.

Royalties

What shall be recognized on an accrual basis in accordance with the substance of the relevant agreement.

Statement of retained earnings

What shows the changes affecting directly the retained earnings of an entity and relates the income statement to the statement of financial position

PAS 16

What standard number provides that an entity shall choose either the cost model or revaluation model as an accounting policy and shall apply that policy to an entire class of p,p,&e.

Profit or Loss (known in the traditional statement)

What term is used the total of income less expenses, EXCLUDING the components of other comprehensive income.

Other Users

What type of users include the employees, customers, governments and their agencies, the public

Primary Users (These users of financial information are the parties to whom general purpose financial reports are primarily directed.)

What type of users include the existing and potential investors, lenders and other creditors.

Accountable / Quantifiable

When it has an effect on assets, liabilities, and equity the event is deemed

June 1973 London and was replaced by the International Accounting Standards Board on 1 April 2001. Philippines then became compliant on 2005 since its process started 1997

When was the International Accounting Standards Committee (IASC) founded?

single economic entity

Where parent and subsidiary relationship exists, CONSOLIDATED STATEMENTS for the affiliates are usually made because for practical and economic purposes, the parent and the subsidiary are a

REALIZABLE value

also known as "CURRENT sales exchange price"

PRESENT value

also known as "FUTURE exchange price"

Current Cost

also known as "current purchase exchange price"

Historical Cost

also known as "past purchase exchange price"

Trading securities (purpose of trade)

are stocks or bonds that management plans to purchase and sell in order to make money in the short term.

Conglomerate (conglomerate's subsidiary businesses runs independently of the other business divisions, but the subsidiaries' management reports to senior management at the parent company.)

is a corporation that is made up of a number of different, seemingly unrelated businesses. In this entity, one company owns a controlling stake in a number of smaller companies, which conduct business separately.

A Group (Group of Companies)

is a parent entity and all of its subsidiaries

Financial Accounting (its focus on the financial statements which are distributed to stockholders, lenders, financial analysts, and others outside of the company.)

is a specialized branch of accounting that keeps track of a company's financial transactions. Using standardized guidelines, the transactions are recorded, summarized, and presented in a financial report or financial statement such as an income statement or a balance sheet.

A Subsidiary

is an entity that is controlled by a parent company

International Accounting Standards Board (IASB)

replaced the International Accounting Standards Committee (IASC) and created the International Financial Reporting Standards (IFRS)

GAAP (like laws)

represent the rules, procedures, and practices and standards followed in the preparation and presentation of financial statements.

Accounting Standards Council (ASC) - it's successor is FRSC

was created in November 1981 by the Philippine Institute of Certified Public Accountants (PICPA) to establish generally accepted accounting principles in the Philippines.

Net Income - the bottom line (net profit or net loss) / classified in retained earnings

which is the most commonly used indicator of a company's profitability. Of course, if expenses exceed income, this account caption will read differently.