Accounting
Keeping systematic record of business transactions
Recording transactions does not only involve entering the transactions in accounting books, the records should be systematic enough to enable easy understanding of readers. No matter how comprehensive the records are, if they are not produced systematically, then they provide little to no value. (FoA)
Journals
Records involve the input of information into accounting books called _____________
Art
Refers to a way of performing something, it entails creativity and skills to help us attain some objectives. (NoA)
True
Reports generated using management accounting are for internal users only.
Commission on Audit
Responsible for keeping of the government's general accounts.
Bureau of Internal Revenue
Responsible for the assessment and collection of taxes from its constituents.
Bureau of Treasury
Responsible for the safekeeping of national funds.
Bureau of Treasury
Responsible in maintaining accounts of financial transactions of all government agencies
Financial position (balance sheet)
Second type of financial statement
Classifying
Sorting or grouping of similar transactions into specific account titles
General Public
The financial statements of the economy can affect this group's decision to start a business given the current economic conditions, to stay or leave for a higher paying job, to determine the best use of resources, and to determine the optimal level of savings and consumption.
Ledgers
The journalised transactions and events are classified in ______________
Income, revenues, expenses
The three things the government particularly looks at
Management
Their goal is to produce income
Government
Their main purpose is to regulate the businesses within an economy. Their role is to scrutinise businesses, especially large ones. They see if businesses are not trying to deceive other users of financial statements by misinterpreting the amount of earnings or manipulating portions of the company's financial statements.
Audited financial statements
These are financial statements that underwent the process of auditing.
Journal entries
These are recorded in the journal
General Purpose financial statements
These financial statements are intended to provide information to those who do not have the capability to request directly from the company. (Customers, creditors, potential investors, government agencies). These can possibility answer the inquiries of a wide range of interested users.
Special purpose financial statements
These financial statements are usually produced based on the requests of parties which have the capability to ask for accounting information directly from the company. (Board of directors, managers, employees, and the stockholders or owners/existing investors)
Employees
They are concerned with the company's financial statements because if the company is profitable, they will timely and adequately receive their compensation and additional benefits. It also impacts their morale and performance.
Internal users
They are part of the company.
Commission on Audit
They are tasked to keep and update the accounting books of the whole organisation. Moreover, they disseminate accounting rules and regulations to be used by all agencies.
Owners or Stockholders
They are the existing investors of the company. They want to know if their investments will yield acceptable returns.
Creditors
They are the possible sources of additional funds. They lend their resources to the businesses in exchange for a fee. (Usually in the form of interest) They earn a fixed amount based on the resources that they lend.
Managers
They have authority to make judgements for the company.
Taxing authorities (government)
They need the income statement of the company in order to determine the necessary taxes to be paid
Potential investors
They put their resources (usually money) in a business hoping to earn a decent amount of return. They are people or entities who give their resources to have a claim (equity) in the business. They enjoy no limit on the amount of profits they can receive.
Department of Budget and Management
They shall be responsible for the efficient and sound utilisation of government funds and revenues to effectively achieve the country's development objectives
Cash flows (statement of cash)
Third type of financial statement
Mesopotamia
This is where the early development of accounting can be traced back to.
Meeting Legal Requirements
This procedure aims to protect the public by providing them with the necessary information to make sound decisions.
Analysing
This step in the accounting processes must determine the effect of economic events/transactions on the business. These events/transactions are generally supported by documentary evidences/proofs.
Mesopotamia > Rome > double-entry bookkeeping in Italy > Scotland > Formation of accounting standards like PAS and PFRS
Timeline of the history of accounting
False
True or False: Creditors enjoy no limit on the amount of profits they can receive.
True
True or False: Having high profits is not much of an upside if the company still has substantial debt.
False
True or False: Management reports need to follow accounting standards such as PFRS and PAS
False
True or False: There is a limit on the amount of profit an investor can receive
True
True or False: When a company becomes insolvent, creditors are paid first before investors.
True
True or false: a set of financial statements will only be useful to users after it has gone through the process of auditing
True
True or false: an audit of the financial statements improves their credibility.
General purpose financial statements, Special Purpose financial statements
Two types of financial statements typically produced by companies
Academe
Use financial statements as a blueprint to help understand the field of accountancy. Alternatively, researchers study financial statements to identify particular trends. They may also aim to improve the accountancy practice by searching for loopholes and improvements.
Management accounting
Used in deciding how the business should act going forward. It provides value to the business since it assists the company in selecting only those activities that deliver benefits more than the related costs.
External Users and internal users
Users of financial information
Financial, management, government, auditing, tax, cost, accounting education, accounting research
What are the 8 branches of accounting
Section 109 of Presidential Decree 1445
Where is government accounting defined
Recording
Writing the effects of the events/transactions that have been analysed. May be done manually or via data-processing machines.
Income
A good indicator of the profitability of a company.
Accounting
A system that identifies, records, and communicates relevant economic events to interested users.
Auditor's opinion
Audited financial statements are accompanied by this. It will be the bases whether or not the financial statements are prepared truthfully and without material errors.
Financial accounting
Branch of accounting primarily handling the recording of financial transactions of a business. The financial transactions are later summarised into standard accounting reports, more popularly known as financial statements.
Management
Composed of employees within the company that can implement decisions affecting the company's operations. They are the brains of the company and through financial information, they identify certain problems and respond to them. They also identify strong points in the business—thus they could allocate more resources to these profitable points.
Process
Composed of multiple steps that lead to a common end goal (NoA)
Interpreting
Directs attention to the significance of various matters and relationships, involves the computation of relationship of figures from the financial reports and schedules.
New Government Accounting System
Enhances responsibility accounting in all agencies.
Chartered Institute of Management Accounting
Even though management reports do not follow the requirements imposed by accounting standards like the PFRS and PAS, they are still expected to follow the code of ethics imposed by:
Documentary evidences/proofs
Events or transactions in accounting are generally supported by this
Customers, creditors, potential investors, government, academe, general public
External users
Friar Luca Pacioli
Father of modern accounting
Notes to the financial statement
Fifth type of financial statement
Financial statements
Final product or main goal of accounting. Contains information and all records of a company.
General Public
Financial statements give this group hints about the condition of the economy. If the economy is not doing well, they cut on their spending and increase their savings. If the economy is prosperous, they spend. By analysing the financial statements of companies, they can properly respond to the various economic cycles.
Analysing
First phase of accounting process.
Results of operation (income statement)
First type of financial statement
Changes in equity (statement of changes in equity)
Fourth type of financial statement
Keeping systematic record of business transactions, protecting properties of the business, communicating results to various parties in or connection with the business, meeting legal requirements
Functions of Accounting
General Appropriations Act
Government accounting starts after this. It is the enacted budget of the country for the upcoming year. It has the force of law and states how much an agency can spend for the year.
Summarising
Grouping the various transactions referred to in the classifying process. Accounts are grouped into assets, liabilities, owner's equity/investment, revenue, gains, losses, and expenses.
Management, employees, owners and stockholders.
Internal users
Reporting
Involves the preparation of financial statements
Communicating results to various parties in or connected with the business
Is essential for all concerned parties to enable them to make well-informed decisions. Not only used by external users but also internal users.
Bureau of Treasury
It serves like a bank where the funds are kept
Riskiness of lending, profitability of the company, company's amount of borrowings
Main factors considered by creditors before lending to a company
Customers
Main source of income for businesses. They are the people or entities that acquire goods and services for a fee. They analyse financial information to see if it would be profitable to transact with a business.
Forward-looking, historical
Management accounting is ______________ while financial accounting is _______________
Bureau of Internal Revenue
Meaning of BIR
Securities and Exchange Commission
Meaning of SEC
False - Financial Accounting
Modified true or false: Management accounting summarises financial information gathered within a specified period.
False - Specific Purpose
Modified true or false: The financial statements used by management accountants are general purpose
Double-entry bookkeeping
Most important event in accounting history
False
Owners or stockholders do not care if their invested business is acceptable, they only care if it is profitable.
Philippine Financial Reporting Standards and Philippine Accounting Standards
Philippine accounting standards which supply guidelines as to how companies should prepare their financial statements. These allow users to compare the results of operations of different companies regardless of size and nature.
Department of Budget and Management (DBM)
Prepares the General Appropriations Act and passes it to the Bureau of Treasury. They shall be responsible for the formulation and implementation of the national budget.
Investors, creditors, shareholders/stockholders, government agencies, auditors, other interested outside parties
Primary Users of General Purpose Financial Statements
Top management, department managers, other internal parties.
Primary users of special purpose financial statements
Management accounting
A branch of accounting which focuses on the preparation of financial reports used by managers in their day to day decision making.
Regulating businesses
A crucial role to prevent financial collapse
Steps in the accounting process
Analysing, Recording, Classifying, Summarising, Reporting, Interpreting
Accounting deals with financial information and transactions
Accounting deals only with quantifiable financial transactions. These are the only events identified by the accountants recorded in the books, and communicated to different parties. (NoA)
Accounting is an art
Accounting is a combination of techniques and its application requires applied skill and expertise. (NoA)
Accounting is means and not an end
Accounting is a tool to achieve specific objectives but is not the objective itself. (NoA)
Accounting is an information system
Accounting is recognized and characterized as a storehouse of information. As a service function, it collects processes and communicates financial information of any entity. (NoA)
Accounting is a process
Accounting performs ARCSRI with the end goal of providing information to internal and external parties. (NoA)
Protecting properties of the business
Accounting records serve as the evidence that properties of a business do exist, or how much of a particular resource the company has. Moreover, the accounting system helps in preventing employee frauds and misappropriation of company resources.
Bureau of Treasury
Although it's main role is the safekeeping of funds, they are also responsible for the management and control of the disbursements of such funds.
Government accounting
An accounting system which encompasses the process of analysing, recording, classifying, summarising, and communicating all transactions involving the receipt and disposition of government fund and property and interpreting the result thereof.
Auditing
An unbiased examination and evaluation of the financial statements of an organisation.
Process, art, financial information and transactions, means and not an end, information system
Basic features of accounting/nature of accounting
Summa de Arithmetica, Geometria, Proportioni et Proportionalita
Book of Friar Luca Pacioli
Management reports
Can be done whenever requested or required.