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