(2) Accounting 1101 Chapter 1

Examples of Accounting Principles

Requires that assets should be recorded initially at original acquisition cost

It is recognized when it is probable that an outflow of resources embodying economic benefits will be required for the settlement of a present obligation and the amount of the obligation can be measured reliably

The settlement of the obligation requires payment of cash, other assets or services

Income should be recognized when earned rather than when cash is received

All cost and expenses incurred in earning revenue should be reported in the same time

Means that income is recognized when earned regardless of when received and expense is recognized when incurred regardless of when paid

The timing of receipts and payment of cash is not the basis for the recording of income and expenses

The timing of the earning process of income and the incurrence of expenses are considered

Authorized by law to promulgate rules and regulations affecting the practice of the accountancy professions in the Philippines

They are responsible for the preparation and grading of CPA exam

Generally CPAs practice their profession in three main areas

Employed by a particular business firm or not for profit organizations

Those that render services to the government

An international examination that is given to financial managers, executives, or analyst who have atleast three years of managerial of supervisory experience

Designed to equip student with all necesary technical skills and basic knowledge required to fulfill a support role in accountancy and necessary skill at a technician level

Exams now administered in the Philippines for qualified graduates after a review conducted by accredited orgs in the Philippines

Concerned with the recording of transactions for an economic unit and the periodic preparation of reports

Examination of financial statement for the purpose of expressing an opinion as to the fairness with which the FS is prepared

An independent review of the accounting records

Has no precise coverage but is generally refer to services to clients on other phases of business operation

Employ historical and estimated data in assisting daily operations and in planning future operations

Preparation of tax returns and determination of tax consequences of certain proposed business transactions

Must always be updated with the new tax legislation

Concerned with the design and the implementation of procedures for accumulation of financial data

A system that will provide checks and balances to safeguard the assets of the company

Deals with the principles and procedures associated with the accounting for the national and local government

Focus is the custody of public funds and the purpose to which such funds are committed

Emphasizes the determination of control of costs particularly in manufacturing companies.

Interprets cost data for the use of management in controlling current operation and planning for the future

ACCOUNTING VS AUDITNG

Analytical because it involves examination of financial statements to ascertain their conformity as with the GAAP and the expression of an opinion as to the fairness of the presentation of financial statements

Is the systematic and chronological recording of business transaction and events

It is procedural and is referred to as recording phase of accounting

The basic notions or fundamental promises on which the accounting process is based

Serves as the foundation or bedrock in order to enhance understanding and usefulness of the financial statements

Accounting entity is viewed as continuing operation indefinitely

T/F

In cases where business suffer heavy losses and has difficulty of continuing. Going concern of continuity assumption could not be abandoned

The business is treated as a separate entity from that of its owners, manger and employees who constitutes the firm

An assumption that requires entities to include in their accounting records only transaction data that can be measured in terms of money

Concept behind the preparation of financial statements for a specified time period

Twelve month period that starts January 1 and ends December 31

A twelve month period that starts at any month of the year other than January and ends twelve month after the start period